Exhibit 13.1

 

**TRANSALTA CORPORATION**

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**2010 RENEWAL ANNUAL INFORMATION FORM**

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**FOR THE YEAR ENDED DECEMBER 31, 2009**

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**FEBRUARY 24, 2010**

 

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**TABLE OF CONTENTS**

 
| PRESENTATION OF INFORMATION                                         | 1   |
|---------------------------------------------------------------------|-----|
| SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS                   | 1   |
| DOCUMENTS INCORPORATED BY REFERENCE                                 | 2   |
| CORPORATE STRUCTURE                                                 | 2   |
| OVERVIEW                                                            | 3   |
| GENERAL DEVELOPMENT OF THE BUSINESS                                 | 4   |
| BUSINESS OF TRANSALTA                                               | 8   |
| ENVIRONMENTAL RISK MANAGEMENT                                       | 24  |
| RISK FACTORS                                                        | 27  |
| EMPLOYEES                                                           | 35  |
| CAPITAL STRUCTURE                                                   | 35  |
| CREDIT RATINGS                                                      | 36  |
| DIVIDENDS                                                           | 37  |
| MARKET FOR SECURITIES                                               | 37  |
| PRIOR SALES                                                         | 37  |
| DIRECTORS AND OFFICERS                                              | 38  |
| INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL  TRANSACTIONS        | 45  |
| INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND  SENIOR OFFICERS  | 45  |
| CORPORATE CEASE TRADE ORDERS, BANKRUPTCIES OR SANCTIONS             | 46  |
| CONFLICTS OF INTEREST                                               | 46  |
| LEGAL PROCEEDINGS AND REGULATORY ACTIONS                            | 46  |
| TRANSFER AGENT AND REGISTRAR                                        | 47  |
| INTERESTS OF EXPERTS                                                | 47  |
| ADDITIONAL INFORMATION                                              | 47  |
| AUDIT AND RISK COMMITTEE                                            | 47  |
| APPENDIX “A” – AUDIT AND RISK COMMITTEE CHARTER | A-1 |
| APPENDIX “B”  – GLOSSARY OF TERMS               | B-1 |

 

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**PRESENTATIONOF INFORMATION**

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Unless otherwise noted, the information contained in this annualinformation form (“**Annual Information Form**”)is given as at or for the year ended December 31, 2009.  Amounts are expressed in Canadian dollarsunless otherwise indicated.  Financialinformation is presented in accordance with Canadian generally acceptedaccounting principles.

 

**SPECIALNOTE REGARDING FORWARD LOOKING STATEMENTS**

** **

This Annual Information Form, the documents incorporated herein byreference, and other reports and filings made with the securities regulatoryauthorities, include forward looking statements.  All forward looking statements are based onTransAlta’s beliefs as well as assumptions based on information available atthe time the assumption was made and on management’s experience and perceptionof historical trends, current conditions and expected further developments aswell as other factors deemed appropriate in the circumstances.  Forward looking statements are not facts, butonly predictions and generally can be identified by the use of statements thatinclude phrases such as “may”, “will”, “believe”, “expect”, “anticipate”, “intend”,“plan”, “foresee”, “potential”, “enable”, “continue” or other comparableterminology.  These statements are notguarantees of TransAlta’s future performance and are subject to risks,uncertainties and other important factors that could cause TransAlta’s actualperformance to be materially different from those projected.

 

In particular, this Annual Information Form contains forwardlooking statements pertaining to the following: expectations relating to thetiming of the completion and commissioning of projects under development andtheir attendant costs; expectations relating to the timing and cost of planneduprates and upgrades at various facilities; expectations relating to the timingof the completion of the FEED (as defined herein) study regarding carboncapture and storage and the cost of the study; estimates of recoverable coalreserves at the Corporation’s Whitewood and Highvale mines; TransAlta’s plansto invest in new capacity; expectations for demand for electricity in both theshort and long term; expectations in respect of generation production;TransAlta’s plans to install mercury control equipment at its Alberta thermaloperations and its initiative to reduce nitrogen oxide and mercury emissionsfrom its Centralia Plant; expected governmental regulatory regimes; theCorporation’s trading strategies; and expectations relating to therenegotiation of certain of the collective bargaining agreements to whichTransAlta is a party.

 

Factors that may adversely impact the Corporation’s forward lookingstatements include risks relating to: (i) fluctuations in market pricesand availability of fuel supplies required to generate electricity and in theprice of electricity; (ii) the regulatory and political environments inthe jurisdictions in which the Corporation operates; (iii) environmentalrequirements and changes in, or liabilities under, these requirements; (iv) changesin general economic conditions including interest rates; (v) operationalrisks involving the Corporation’s facilities, including unplanned outages atsuch facilities; (vi) disruptions in the transmission and distribution ofelectricity; (vii) effects of weather; (viii) disruptions in thesource of fuels, water, wind or biomass required to operate the Corporation’sfacilities; (ix) natural disasters; (x) equipment failure;(xi) trading risks; (xii) industry risk and competition;(xiii) fluctuations in the value of foreign currencies and foreignpolitical risks; (xiv) need for additional financing; (xv) structuralsubordination of securities; (xvi) counterparty credit risk; (xvii) insurancecoverage; (xviii) the Corporation’s provision for income taxes;(xix) legal proceedings involving the Corporation; (xx) reliance onkey personnel (xxi) labour relations matters; and (xxii) developmentprojects and acquisitions.  The foregoingrisk factors, among others, are described in further detail under the heading “RiskFactors” in this Annual Information Form and in the documents incorporatedby reference in this Annual Information Form, including the TransAltaManagement’s Discussion and Analysis for the year ended December 31, 2009(the “**Annual MD&A**”).

 

Readers are urged to consider these factors carefully in evaluating theforward looking statements and are cautioned not to place undue reliance onthese forward looking statements.  Theforward looking statements included in this document are made only as of thedate hereof and the Corporation does not undertake to publicly update theseforward looking statements to reflect new information, future events orotherwise, except as required by applicable laws.  In light of these risks, uncertainties andassumptions, the forward looking events might occur to a different extent or ata different time than the Corporation has described or might not occur.  The Corporation cannot assure you thatprojected results or events will be achieved.

 

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**DOCUMENTSINCORPORATED BY REFERENCE**

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TransAlta’s Audited Consolidated Financial Statements for the yearended December 31, 2009 and the Annual MD&A are hereby specificallyincorporated by reference in this Annual Information Form.  Copies of these documents are available onSEDAR at www.sedar.com.

 

**CORPORATESTRUCTURE**

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**Name and Incorporation**

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TransAlta Corporation was formed by Certificate of Amalgamation issuedunder the *Canada Business Corporations Act* (the “**CBCA**”) on October 8, 1992.  On December 31, 1992, a Certificate ofAmendment was issued in connection with a plan of arrangement involving theCorporation and TransAlta Utilities Corporation (“**TransAltaUtilities**” or “**TAU**”) under theCBCA.  The plan of arrangement, which wasapproved by shareholders on November 26, 1992, resulted in commonshareholders of TransAlta Utilities exchanging their common shares for sharesof TransAlta on a one for one basis. Upon completion of the arrangement, TransAlta Utilities became a whollyowned subsidiary of TransAlta.  On January 1,2009, TransAlta was again issued a Certificate of Amalgamation under the CBCAin connection with the amalgamation of TransAlta Corporation, TransAltaUtilities, TransAlta Energy Corporation (“**TransAlta Energy**”or “**TEC**”) and Keephills 3 GP Ltd.  The amalgamation was completed as part of aseries of transactions involving TransAlta and certain of its subsidiaries andaffiliates carried out to reorganize (the “**Reorganization**”)TransAlta’s interest in certain of its assets.

 

The registered office and principal place of business of TransAlta isat 110 - 12th Avenue S.W., Calgary, Alberta, Canada, T2R0G7.

 

**Intercorporate Relationships**

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Effective January 1, 2009, the Corporation completed theReorganization whereby the assets and business affairs of TAU and TEC (with theexception of the wind business) were transferred to TransAlta GenerationPartnership, a new Alberta general partnership, whose partners are TransAltaCorporation and TransAlta Generation Ltd., a wholly owned subsidiary ofTransAlta Corporation.  TransAltaGeneration Partnership is managed by TransAlta Corporation pursuant to theterms the partnership agreement and a management services agreement.  Immediately following the transfer of assetsby TAU and TEC to TransAlta Generation Partnership, TransAlta Corporationamalgamated with TAU, TEC, and Keephills 3 GP Ltd. pursuant to theCBCA.  TransAlta remains the holdingentity of the various businesses of the Corporation, some of which are now helddirectly, in the case of certain wind assets, and some of which are now heldindirectly, in the case of both the former generation assets and businesses ofTAU and TEC and the assets and business of Canadian Hydro Developers, Inc.(“**Canadian Hydro**”).  TransAlta completed its acquisition ofCanadian Hydro on November 4, 2009.

 

As of January 1, 2009, the principal subsidiaries of theCorporation and their respective jurisdictions of formation are set out below:

 

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**Notes:**

(1)           TransAlta USA Inc. is wholly-owned byTransAlta Holdings ULC, which is wholly-owned by TransAlta.

(2)           The remaining 0.01 per cent interestin TEC Limited Partnerships is owned by TransAlta (Ft. McMurray) Ltd.

 

Unless the context otherwise requires, all references to the “**Corporation**” and to “**TransAlta**”, “**we**”, “**our**” and “**us**” herein refer to TransAlta Corporation and itssubsidiaries on a consolidated basis. References to “TransAlta Corporation” herein refer to TransAltaCorporation, excluding its subsidiaries.

 

**OVERVIEW**

** **

TransAlta and its predecessors have been engaged in the production andsale of electric energy since 1909.  TheCorporation is among Canada’s largest non-regulated electricity generation andenergy marketing companies with an aggregate net ownership interest of 8,776megawatts (“**MW**”) of generating capacity1 operating in facilities havingapproximately 10,578 MW of aggregate generating capacity.  In addition, the Corporation has facilitiesunder construction with a net ownership interest of 478 MW of generatingcapacity in facilities designed to have aggregate generating capacity of703 MW, for total net ownership of 9,253 MW of generating capacity infacilities that have or will have aggregate capacity of 11,281 MW.  The Corporation is focused on generatingelectricity in Canada, the United States and Australia through its diversifiedportfolio of facilities fuelled by coal, gas, hydroelectric, wind, geothermaland biomass resources.

 

In Canada, the Corporation holds a net ownership interest of6,461 MW of electrical generating capacity in thermal, gas fired, windpowered, hydroelectric and biomass facilities, including 5,244 MW inWestern Canada, 1,040 MW in Ontario, 99 MW in Québec and 80 MWin New Brunswick.

 

 

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| 1 |   | TransAlta measures capacity as the net  maximum capacity (“NMC”) that a unit can sustain over a period of time, which  is consistent with the industry standards. All capacity amounts are as of the  date of this Annual Information Form and represent capacity owned and  operated by the Corporation unless otherwise indicated. |
|---|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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In the United States, the Corporation’s principal facilities include a1,376 MW thermal facility and a 248 MW gas fired facility, bothlocated in Centralia, Washington, which supply electricity to the Pacificnorthwest.  The Corporation also holds a50 per cent interest in CE Generation, LLC (“**CEGeneration**”), through which it has an aggregate net ownershipinterest of approximately 385 MW of generating capacity in geothermalfacilities in California and gas fired facilities in Texas, Arizona and NewYork.  In addition, the Corporation has6 MW of electrical generating capacity through hydroelectric facilitieslocated in Washington and Hawaii.

 

In Australia, the Corporation has 300 MW of net electricalgenerating capacity from gas fired generation facilities.

 

The Corporation regularly reviews its operations in order to optimizeits generating assets and evaluates appropriate growth opportunities.  The Corporation has in the past and may inthe future make changes and additions to its fleet of coal, gas, hydro, wind,geothermal and biomass fuelled facilities.

 

The Corporation is organized into two business segments: Generation andCommercial Operations and Development. The Generation group is responsible for constructing, operating andmaintaining electricity generation facilities. The Commercial Operations and Development group is responsible formanaging the sale of production, purchasing natural gas, transmission capacityand market risks associated with the Corporation’s generation assets and fornon asset backed trading activities. Both segments are supported by a corporate group that provides finance,treasury, legal, regulatory, environmental, health and safety, sustainabledevelopment, corporate communications, government relations, informationtechnology, human resources, internal audit, and other administrative support.

 

**GENERALDEVELOPMENT OF THE BUSINESS**

** **

The significant events and conditions affecting TransAlta’s businessduring the three most recently completed financial years are summarizedbelow.  Certain of these events andconditions are discussed in greater detail under the heading “Business ofTransAlta” in this Annual Information Form.

 

**Recent Developments**

** **

·              On January 11, 2010, theCorporation announced it has been awarded a 25-year power purchase agreement toprovide an additional 54 MW of wind power to New Brunswick Power Distributionand Customer Service Corporation (“**New Brunswick Power**”).  The capital cost of the project is estimatedto be $100 million.  Construction isexpected to commence in early 2010 and the facility is expected to be inservice by the end of 2010.

 

**Year Ended December 31, 2009**

** **

·              On November 18, 2009, theCorporation issued $400 million principal amount of 6.4% medium term notesmaturing November 18, 2019 for net proceeds to the Corporation of$397.2 million.

 

·              On November 17, 2009, theCorporation hosted its second Alberta fixed price power auction, wherebycustomers were able to lock in wholesale power volumes for 2010 through 2013 atcompetitive market prices.

 

·              On November 13, 2009, theCorporation issued US$500 million principal amount of 4.75% senior notesmaturing January 15, 2015 for net proceeds to the Corporation of US$495.9 million.

 

·              On November 5, 2009, theCorporation completed a public offering of 20,522,500 common shares at a priceof $20.10 per common share, resulting in gross proceeds to the Corporation ofapproximately $412.5 million.  Thenet proceeds from the offering were used to repay a portion of the indebtednessincurred in connection with the Corporation’s acquisition of Canadian Hydro.

 

·              On November 4, 2009,TransAlta completed the acquisition, through a wholly-owned subsidiary, of allof the issued and outstanding common shares of Canadian Hydro for aggregatecash consideration of $755.0 million. At closing of the acquisition, Canadian Hydro operated 694 MW ofwind, hydro 

 

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andbiomass facilities in British Columbia, Alberta, Ontario and Québec and alsohad 18 MW under construction.

 

·              On October 14, 2009, thefederal and provincial governments announced that the Corporation’s carboncapture and storage (“**CCS**”) project,Project Pioneer, had received committed funding of more than$750 million.  The funding is beingprovided as part of the Government of Canada’s $1 billion Clean Energy Fund andthe Government of Alberta’s $2 billion CCS initiative.  The funding will also support the undertakingof a Front End Engineering and Design (“**FEED**”)study.  The FEED study is expected tocost $20 million: $10 million will come from the federal government;$5 million will come from the provincial government; and $5 million willcome from the Corporation and the other industry partners.  The FEED study is expected to be completed bythe end of 2010.  Construction of thefacility, if supported as expected by the study, would be targeted for start-upin 2015.  The Corporation is the managingpartner of the joint government-industry partnership.

 

·              Effective September 30,2009, the Corporation signed a new long-term contract with the Ontario PowerAuthority (the “**OPA**”) for the Sarnia regionalnatural gas cogeneration power plant. The contract is capacity based and has a term from July 1, 2009 to December 31,2025.  While the specific terms andconditions of the contract are confidential, the OPA has indicated that theagreement is in line with other similar agreements executed by the OPA.

 

·              On May 29, 2009, theCorporation issued $200 million principal amount of 6.45% senior notesmaturing May 29, 2014.  The netproceeds from the offering were used for debt repayment, financing of theCorporation’s long-term investment plan, and for general corporate purposes.

 

·              On May 20, 2009, theCorporation announced that it would advance a major maintenance outage on its353 MW Sundance 3 facility from the second quarter of 2010 into the second andthird quarters of 2009.

 

·              On May 6, 2009, theCorporation announced that it had received regulatory approval from the TorontoStock Exchange (“**TSX**”) for the renewal of itsnormal course issuer bid (“**NCIB**”)program.  Under the NCIB, the Corporationhas approval to purchase for cancellation, up to 9.9 million of its commonshares, representing 5 per cent of its common shares issued and outstanding asof April 30, 2009.

 

·              On April 28, 2009, theCorporation announced plans to design, build and operate Ardenville, a69 MW wind power project in southern Alberta.  The capital cost of the project is estimatedat $135 million.  Included in thecapital cost of the project is the purchase of an already operational 3 MWturbine at Macleod Flats.  Commercialoperations of the remainder of the Ardenville wind project is expected tocommence in the first quarter of 2011.

 

·              On February 10, 2009, theCorporation reported that the 406 MW Sundance 4 facility had experiencedan unplanned outage in December 2008 relating to the failure of an induceddraft fan.  At the time, the unit wasderated to approximately 205 MW. The repair of the fan components by the original equipment manufacturertook longer than planned and, therefore, Unit 4 did not return to full serviceuntil February 23, 2009.  As aresult of the extended derate, first quarter production was reduced by 328 GWhand net earnings declined by approximately $10 million.  On April 27, 2009, the Balancing Pool,an entity established by the Government of Alberta, rejected the Corporation’sassertion that this outage should be regarded as a High Impact Low ProbabilityForce Majeure Event.  As required by thePPA legislation, the Corporation was required to pay the penalties related tothe derate.  The Corporation settled theissue in the third quarter and the terms of the settlement are confidential.

 

·              On January 29, 2009, theboard of directors of the Corporation (the “**Board**”)declared a quarterly dividend of $0.29 per common share, payable April 1,2009 to holders of record on March 1, 2009.  This represents a $0.02 per share increase inthe quarterly dividend, yielding on an annualized basis a dividend of $1.16 pershare.

 

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·              On January 29, 2009, theCorporation announced that it would be proceeding with the addition of two23 MW efficiency uprates at its Keephills plant in Alberta.  Both Keephills units 1 and 2 will be upgradedto 406 MW and are expected to be operational by the end of 2011 and 2012,respectively.  The total capital cost ofthe projects is estimated to be $68 million.

 

·              Effective January 1,2009, the Corporation completed the Reorganization whereby the assets andbusiness affairs of TAU and TEC (with the exception of the wind business) weretransferred to TransAlta Generation Partnership, an Alberta generalpartnership, whose partners are TransAlta and TransAlta Generation Ltd., awholly owned subsidiary of TransAlta. TransAlta Generation Partnership is managed by TransAlta pursuant to theterms of a partnership agreement and a management services agreement.  Immediately following the transfer of assetsby TAU and TEC to TransAlta Generation Partnership, TransAlta Corporationamalgamated with TAU, TEC, and Keephills 3 GP Ltd. pursuant to theCBCA.  TransAlta remains the holdingentity of the various businesses of the Corporation, some of which are helddirectly, in the case of the wind assets, and some of which are heldindirectly, in the case of the former generation assets and businesses of TAUand TEC.

 

**Year Ended December 31, 2008**

** **

·              On December 31, 2008, theCorporation announced that the 96 MW, $170 million Kent Hills WindFarm had begun commercial operation.  Thewind farm consists of 32 Vestas V90, 3MW wind turbines.  The capacity from this project is sold undera power purchase agreement with New Brunswick Power.

 

·              On October 8, 2008, theCorporation announced the completion of the sale of its Mexican businesses toIntergen Global Ventures B.V. II for a sale price ofUS$303.5 million.  The sale includedthe 252 MW gas/diesel combined cycle gas plant in Campeche, a 259 MWcombined cycle gas plant in Chihuahua and all associated commercialarrangements.

 

·              On May 27, 2008, theCorporation announced that, commencing in 2009, it would be constructinganother 66 MW wind generation facility in southern Alberta, consisting of22 Vestas V90 3 MW wind turbines. The total capital cost for this expansion of the Summerview wind powerproject is expected to be $123 million. The capacity from this project is expected to be sold on the AlbertaPower Pool.

 

·              On May 5, 2008, theCorporation announced that it had received regulatory approval from the TSX forthe continuation of its NCIB program. Under the NCIB program, the Corporation received approval to purchase,for cancellation, up to 19.9 million of its common shares, representing 10per cent of its public float as of April 23, 2008.

 

·              On April 21, 2008, theCorporation announced a 53 MW efficiency uprate at Unit 5 of its Sundancefacility.  The total capital cost of theproject was approximately $113.5 million and commercial operationscommenced in November 2009.

 

·              On April 3, 2008,TransAlta announced a partnership with Alstom LLC to develop a one milliontonne/year carbon capture and storage project at one of TransAlta’s coal firedpower stations in Alberta.

 

·              On February 20, 2008, theCorporation announced it had signed a purchase and sale agreement with IntergenGlobal Ventures B.V. (“**Intergen**”)pursuant to which Intergen agreed to pay the Corporation US$303.5 millionin cash for its Mexican assets.

 

·              On February 13, 2008, theCorporation announced that, commencing in 2009, it would be constructing a66 MW wind generation facility in southern Alberta, consisting of 22Vestas V90 3 MW wind turbines.  Thetotal capital costs for this Blue Trail wind power project is expected to be$115 million.  The capacity fromthis project is expected to be sold on the Alberta Power Pool.

 

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·              On February 1, 2008, theBoard declared a quarterly dividend of $0.27 per common share, payable April 1,2008 to holders of record on March 1, 2008.  This represents a $0.02 per share increase inthe quarterly dividend, yielding on an annualized basis a dividend of $1.08 pershare.

 

**Year Ended December 31, 2007**

** **

·              During the third quarter, theCorporation completed an uprate on the Sundance Unit 4 facility.  A final measurement took place in the fourthquarter of 2007 and the generating capacity added as a result of this upratewas 53 MW.

 

·              On September 11, 2007,the Corporation announced it had received regulatory approval to increase thenumber of shares it may purchase under its NCIB program.  As a result, the Corporation was authorizedto purchase for cancellation up to 20.2 million of its common shares orapproximately 10 per cent of the 202 million common shares issued andoutstanding as of April 23, 2007.

 

·              On July 17, 2007, theCorporation amended the power purchase agreement with New Brunswick Power toincrease capacity at its Kent Hills wind power facility from 75 MW to96 MW.  As a result, total capitalcosts for the Kent Hills project increased by $40 million, from$130 million to $170 million. The Corporation also signed a purchase and sale agreement with VectorWind Energy, then a wholly owned subsidiary of Canadian Hydro, to acquire itsFairfield Hill wind power site, including an option to develop the site at afuture date.

 

·              On June 21, 2007,TransAlta Utilities entered into an agreement with Bucyrus Canada Limited andBucyrus International Inc. for the purchase of a dragline to be used primarilyin the supply of coal for the Keephills 3 joint venture project.  The total dragline purchase costs wereapproximately $150 million, with final payments for goods and services dueby May 2010.  The total paymentsmade under this agreement to December 31, 2009 were $124.7 million.

 

·              On February 26, 2007, theCorporation and EPCOR Power Development Corporation (now Capital PowerCorporation or “**Capital Power**”) announced thatthey were proceeding with building the 450 MW Keephills 3 powerproject located approximately 70 kilometres west of Edmonton, Alberta.  The capital cost for the project, includingmine capital, is expected to be approximately $1.6 billion and is expected tobe completed at the end of the first quarter of 2011.  Through the Keephills 3 LimitedPartnership (“**K3LP**”), an affiliate of theCorporation, TransAlta and Capital Power will be equal partners in theownership of Keephills 3, with TransAlta responsible for managing thejoint venture and Capital Power responsible for the construction.  Upon completion, it is expected thatTransAlta will operate the facility and Capital Power and TransAlta willindependently dispatch and market their share of the unit’s electricaloutput.  The project has receivedapproval from the AEUB and from Alberta Environment.

 

·              On January 19, 2007, theCorporation announced that it had been awarded a 25 year power purchaseagreement to provide 75 MW of wind power to New Brunswick Power.  Under the agreement, TransAlta constructed,owns and operates a wind power facility in New Brunswick.

 

·              On January 2, 2007, theCorporation redeemed, at par, all of its outstanding 7.75 per cent preferredsecurities, with an outstanding principal amount of $175 million.

 

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**BUSINESSOF TRANSALTA**

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**Generation Business Segment**

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The following table summarizes the Corporation’s generation facilitieswhich are operating, under construction or under development, as at January 31,2010:

 
| **Western Canada**       | ** **                | ** **         | ** **                                    | ** ** | ** **                               | ** **                |
|--------------------------|---------------------------|--------------------|-----------------------------------------------|------------|------------------------------------------|---------------------------|
| **Facility**             | **Capacity  (MW)****(1)** | **Ownership  (%)** | **Net  Capacity  Ownership  Interest****(1)** | **Fuel**   | **Revenue Source**                       | **Contract  Expiry Date** |
| ** **               | ** **                | ** **         | ** **                                    | ** ** | ** **                               | ** **                |
| Sundance                 | 2,126                     | 100                | 2,126                                         | Coal       | Alberta PPA / Merchant(2)                | 2017, 2020                |
| Keephills (4)            | 812                       | 100                | 812                                           | Coal       | Alberta PPA/Merchant(4)                  | 2020                      |
| Sheerness                | 780                       | 25                 | 195                                           | Coal       | Alberta PPA                              | 2020                      |
| Wabamun                  | 279                       | 100                | 279                                           | Coal       | Merchant                                 | -                         |
| Genesee 3           | 450                       | 50                 | 225                                           | Coal       | Merchant                                 | -                         |
| Keephills 3 (3)     | 450                       | 50                 | 225                                           | Coal       | Merchant                                 | -                         |
| Fort Saskatchewan        | 118                       | 30                 | 35                                            | Gas        | Long-term contract (“**LTC**”) | 2019                      |
| Meridian                 | 220                       | 25                 | 55                                            | Gas        | LTC                                      | 2024                      |
| Poplar Creek             | 356                       | 100                | 356                                           | Gas        | LTC/Merchant                             | 2024                      |
| Blue Trail               | 66                        | 100                | 66                                            | Wind       | Merchant                                 | -                         |
| Castle River (5)         | 44                        | 100                | 44                                            | Wind       | LTC/Merchant                             | 2011                      |
| Cowley North             | 20                        | 100                | 20                                            | Wind       | Merchant                                 | -                         |
| Cowley Ridge             | 21                        | 100                | 21                                            | Wind       | Merchant                                 | -                         |
| Macleod Flats            | 3                         | 100                | 3                                             | Wind       | Merchant                                 | -                         |
| McBride Lake             | 75                        | 50                 | 38                                            | Wind       | LTC                                      | 2024                      |
| Sinnott                  | 7                         | 100                | 7                                             | Wind       | Merchant                                 | -                         |
| Soderglen                | 71                        | 50                 | 35                                            | Wind       | Merchant                                 | -                         |
| Summerview 1 (6)         | 70                        | 100                | 70                                            | Wind       | Merchant                                 | -                         |
| Summerview 2 (3)         | 66                        | 100                | 66                                            | Wind       | Merchant                                 | -                         |
| Taylor Wind              | 3                         | 100                | 3                                             | Wind       | Merchant                                 | -                         |
| Ardenville (3)           | 69                        | 100                | 69                                            | Wind       | Merchant                                 | -                         |
| Akolkolex                | 10                        | 100                | 10                                            | Hydro      | LTC                                      | 2015                      |
| Barrier                  | 13                        | 100                | 13                                            | Hydro      | Alberta PPA                              | 2020                      |
| Bearspaw                 | 17                        | 100                | 17                                            | Hydro      | Alberta PPA                              | 2020                      |
| Belly River              | 3                         | 100                | 3                                             | Hydro      | Merchant                                 | -                         |
| Big Horn                 | 120                       | 100                | 120                                           | Hydro      | Alberta PPA                              | 2020                      |
| Bone Creek (3)           | 18                        | 100                | 18                                            | Hydro      | LTC                                      | 2047                      |
| Brazeau                  | 355                       | 100                | 355                                           | Hydro      | Alberta PPA                              | 2020                      |
| Cascade                  | 36                        | 100                | 36                                            | Hydro      | Alberta PPA                              | 2020                      |
| Ghost                    | 51                        | 100                | 51                                            | Hydro      | Alberta PPA                              | 2020                      |
| Horseshoe                | 14                        | 100                | 14                                            | Hydro      | Alberta PPA                              | 2020                      |
| Interlakes               | 5                         | 100                | 5                                             | Hydro      | Alberta PPA                              | 2020                      |
| Kananaskis               | 19                        | 100                | 19                                            | Hydro      | Alberta PPA                              | 2020                      |
| Pingston                 | 45                        | 50                 | 23                                            | Hydro      | LTC                                      | 2023                      |
| Pocaterra                | 15                        | 100                | 15                                            | Hydro      | Alberta PPA                              | 2013                      |
| Rundle                   | 50                        | 100                | 50                                            | Hydro      | Alberta PPA                              | 2020                      |
| Spray                    | 103                       | 100                | 103                                           | Hydro      | Alberta PPA                              | 2020                      |
| St. Mary                 | 2                         | 100                | 2                                             | Hydro      | Merchant                                 | -                         |
| Taylor Hydro             | 13                        | 50                 | 6                                             | Hydro      | Merchant                                 | -                         |
| Three Sisters            | 3                         | 100                | 3                                             | Hydro      | Alberta PPA                              | 2020                      |
| Upper Mamquam            | 25                        | 100                | 25                                            | Hydro      | LTC                                      | 2025                      |
| Waterton                 | 3                         | 100                | 3                                             | Hydro      | Merchant                                 | -                         |
| GPEC                     | 25                        | 100                | 25                                            | Biomass    | LTC                                      | 2019-2024                 |
| **Total Western Canada** | **7,051**                 | ** **         | **5,666**                                     | ** ** | ** **                               | ** **                |

 

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| **Eastern  Canada**       |
|---------------------------|
| **Facility**              | **Capacity  (MW)****(1)** | **Ownership  (%)** | **Net  Capacity  Ownership  Interest****(1)** | **Fuel** | **Revenue  Source** | **Contract  Expiry Date** |
| ** **                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Mississauga               | 108 | 50 | 54 | Gas | LTC | 2017 |
| Ottawa                    | 68 | 50 | 34 | Gas | LTC | 2012 |
| Sarnia (7)                | 506 | 100 | 506 | Gas | LTC | 2022-2025 |
| Windsor                   | 68 | 50 | 34 | Gas | LTC/Merchant | 2016 |
| Kent  Hills               | 96 | 83 | 80 | Wind | LTC | 2033 |
| Kent  Hills Expansion (3) | 54 | 100 | 54 | Wind | LTC | 2035 |
| Le  Nordais               | 99 | 100 | 99 | Wind | LTC | 2033 |
| Melancthon I         | 68 | 100 | 68 | Wind | LTC | 2026 |
| Melancthon II        | 132 | 100 | 132 | Wind | LTC | 2028 |
| Wolfe  Island             | 198 | 100 | 198 | Wind | LTC | 2029 |
| Appleton                  | 1 | 100 | 1 | Hydro | LTC | 2011 |
| Galetta                   | 2 | 100 | 2 | Hydro | LTC | 2011 |
| Misema                    | 3 | 100 | 3 | Hydro | LTC | 2027 |
| Moose  Rapids             | 1 | 100 | 1 | Hydro | LTC | 2011 |
| Ragged  Chute             | 7 | 100 | 7 | Hydro | LTC | 2011 |
| **Total  Eastern Canada** | **1,411** | ** ** | **1,273** | ** ** | ** ** | ** ** |

 
| **US**                                     |
|--------------------------------------------|
| **Facility**                               | **Capacity  (MW)****(1)** | **Ownership    (%)** | **Net  Capacity  Ownership  Interest****(1)** | **Fuel** | **Revenue  Source** | **Contract  Expiry Date** |
| ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Centralia(8)                               | 1,376 | 100 | 1,376 | Coal | Merchant | - |
| Centralia  Gas                             | 248 | 100 | 248 | Gas | Merchant | - |
| Power  Resource                            | 212 | 50 | 106 | Gas | Merchant | - |
| Saranac                                    | 240 | 37.5 | 90 | Gas | Merchant | - |
| Yuma                                       | 50 | 50 | 25 | Gas | LTC | 2024 |
| Imperial  Valley Geothermal Facilities (9) | 327 | 50 | 164 | Geothermal | LTC | 2016-2029 |
| Skookumchuk  (10)                          | 1 | 100 | 1 | Hydro | - | - |
| Wailuku                                    | 10 | 50 | 5 | Hydro | LTC | 2023 |
| **Total  US**                              | **2,464** | ** ** | **2,015** | ** ** | ** ** | ** ** |

 
| **Australia**        | ** **                | ** **           | ** **                                    | ** ** | ** **          | ** **                |
|----------------------|---------------------------|----------------------|-----------------------------------------------|------------|---------------------|---------------------------|
| **Facility**         | **Capacity  (MW)****(1)** | **Ownership    (%)** | **Net  Capacity  Ownership  Interest****(1)** | **Fuel**   | **Revenue  Source** | **Contract  Expiry Date** |
| ** **           | ** **                | ** **           | ** **                                    | ** ** | ** **          | ** **                |
| Parkeston            | 110                       | 50                   | 55                                            | Gas        | LTC                 | 2016                      |
| Southern  Cross(11)  | 245                       | 100                  | 245                                           | Gas/Diesel | LTC                 | 2013                      |
| **Total  Australia** | **355**                   | ** **           | **300**                                       | ** ** | ** **          | ** **                |
|                 |                      |                 |                                          |       |                |                      |
| **TOTAL**            | **11,281**                | ** **           | **9,254**                                     | ** ** | ** **          | ** **                |

 

**Notes:**

(1)                                  Megawatts are roundedto the nearest whole number.

(2)                                  Merchant capacityrefers to 53 MW, 53 MW and 44 MW uprates on units 4, 5 and 6,respectively.

(3)                                  These facilities arecurrently under development.

(4)                                  Includes two23 MW uprates on units 1 and 2 expected to be commercial in 2011, and2012, respectively.  Merchant capacityrefers to these two uprates.

(5)                                  Includes 7 individualturbines at other locations.

(6)                                  Comprised of 2facilities.

(7)                                  Sarnia’s NMC has beenadjusted from 575 MW due to decommissioning of equipment at the facility.

(8)                                  Centralia Thermal’sNMC has been reduced from 1,404 MW to reflect a lower plant output as aresult of its conversion to burning Powder River Basin coal.

 

- 9 -

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(9)                                  Comprised of 10 facilities.

(10)                            This facility is used to provide areliable water supply to TransAlta’s other generation facilities at Centralia.

(11)                            Comprised of 4 facilities.

 

**Canada: Western Canada**

 

*Thermalfacilities*

* *

The following table summarizes the Corporation’s western Canadianthermal generation facilities:

 
| **Location** | ** ** | **Province** | ** ** | **Plant**                     | ** ** | **Capacity  (MW)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry Date** | ** ** |
|--------------|------------|--------------|------------|-------------------------------|------------|--------------------|------------|--------------------|------------|--------------------------|------------|---------------------------|------------|
| ** **   | ** ** | ** **   | ** ** | ** **                    | ** ** | ** **         | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                | ** ** |
| Wabamun(1)   |       | AB           |       | Wabamun  Unit No. 4      |       | 279                |       | 100                |       | 1968                     |       | -                         |       |
| Sundance     |       | AB           |       | Sundance  Unit No. 1     |       | 280                |       | 100                |       | 1970                     |       | 2017                      |       |
|         |       | AB           |       | Sundance  Unit No. 2     |       | 280                |       | 100                |       | 1973                     |       | 2017                      |       |
|         |       | AB           |       | Sundance  Unit No. 3     |       | 353                |       | 100                |       | 1976                     |       | 2020                      |       |
|         |       | AB           |       | Sundance  Unit No. 4     |       | 406                |       | 100                |       | 1977                     |       | 2020                      |       |
|         |       | AB           |       | Sundance  Unit No. 5     |       | 406                |       | 100                |       | 1978                     |       | 2020                      |       |
|         |       | AB           |       | Sundance  Unit No. 6     |       | 401                |       | 100                |       | 1980                     |       | 2020                      |       |
| Keephills    |       | AB           |       | Keephills  Unit No. 1(2) |       | 406                |       | 100                |       | 1983                     |       | 2020                      |       |
|         |       | AB           |       | Keephills  Unit No. 2(2) |       | 406                |       | 100                |       | 1984                     |       | 2020                      |       |
|         |       | AB           |       | Keephills  Unit No. 3(3) |       | 450                |       | 50                 |       | 2011                     |       | -                         |       |
| Sheerness    |       | AB           |       | Sheerness  Unit No. 1    |       | 390                |       | 25                 |       | 1986                     |       | 2020                      |       |
|         |       | AB           |       | Sheerness  Unit No. 2    |       | 390                |       | 25                 |       | 1990                     |       | 2020                      |       |
| Genesee      |       | AB           |       | Genesee 3                |       | 450                |       | 50                 |       | 2005                     |       | -                         |       |
|         |       |         |       |                          |       |               |       |               |       |                     |       |                      |       |
| **Total**    | ** ** | ** **   | ** ** | ** **                    | ** ** | **4,897**          | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                | ** ** |

 

**Notes:**

(1)                                  Wabamun unit is expected to beremoved from service upon the expiry of its license March 31, 2010.

(2)                                  Includes two 23 MW uprates onunits 1 and 2 expected to be commercial in 2011, and 2012, respectively.

(3)                                  This facility is currently underdevelopment.

 

The Wabamun, Sundance and Keephills facilities (the “**Alberta thermal plants**”) are located approximately 70kilometres west of Edmonton, Alberta and are owned by TransAlta.  The Sheerness facility is jointly owned byTransAlta Cogeneration, L.P. (“**TA Cogen**”), anOntario limited partnership, and ATCO Power (2000) Ltd. (“**ATCO Power**”).  The Genesee facility is jointly owned byTransAlta and Capital Power.  TransAlta’sthermal plants are generally base load plants, meaning that they are expectedto operate for long periods of time at or near their rated capacity.  Availability is an important measure of theeconomic success of a thermal plant.  Theweighted equivalent availability factor for the Alberta thermal plants in 2009was 78.0 per cent compared with 82.9 per cent in 2008 and 87.1 per cent in2007.  For the Sheerness facility, theweighted equivalent availability factor was 93.3 per cent in 2009 compared to94.1 per cent in 2008 and 94.4 per cent in 2007.  For the Genesee 3 facility, the weightedequivalent availability factor was 97.5 per cent in 2009 compared to 78.2 percent in 2008 and 92.9 per cent in 2007.

 

Fuel requirements for TransAlta’s thermal power facilities are suppliedby surface strip coal mines located in close proximity to the facilities.  TransAlta owns two surface mines in Albertathat supply coal to its Alberta thermal plants. The Whitewood mine supplies the Wabamun plant and the Highvale minesupplies the Sundance and Keephills facilities. TransAlta estimates that the recoverable coal reserves contained inthese mines are expected to be sufficient to supply the anticipatedrequirements for the life of these facilities including running post PPA expiryand plant expansion.

 

Coal for the Sheerness facility is provided from the adjacent Sheernessmine.  The coal reserves of the mine areowned, leased or controlled jointly by TA Cogen, ATCO Power and Prairie Mines &Royalties Limited (“**PMRL**”).  TA Cogen and ATCO Power have entered intocoal supply agreements with PMRL, which operates the mine, to supply coal until2026.

 

- 10 -

----

 

Coal for the Genesee 3 facility is provided from the adjacentGenesee mine.  The coal reserves of themine are owned, leased or controlled jointly by PMRL and Capital Power.  The Corporation has entered into coal supplyagreements with PMRL, which operates the mine, to supply coal for the life ofthe facility.

 

In February 2001, the Corporation had originally proposed a900 MW expansion at its Keephills facility.  Although the Corporation received regulatoryapproval to proceed with the expansion, it subsequently made an application in December 2004to amend its 900 MW permit to allow for the construction of a smaller450 MW facility using improved technology.

 

The AEUB approved the amendment and on February 1, 2006, theCorporation entered into a development agreement with Capital Power, to jointlypursue the 450 MW Keephills 3 power project.  On December 18, 2006, the Corporationassigned its rights in the development agreement power project to K3LP, anaffiliate of the Corporation.  K3LPsubsequently sold a 50 per cent undivided interest in the Keephills 3power project to the EPCOR Power Development (K3) Limited Partnership (apredecessor to Capital Power) and the parties have entered into a joint ventureagreement governing the continued development of the Keephills 3 powerproject.

 

On February 26, 2007, construction of the net 450 MWKeephills 3 power project was commenced. The capital cost for the project, including mine capital, is expected tobe approximately $1.9 billion and is expected to be completed at the end of thesecond quarter of 2011. Through K3LP, TransAlta and Capital Power are equalpartners in the ownership of Keephills 3, with TransAlta responsible formanaging the joint venture and Capital Power responsible for construction.  Upon completion, it is expected thatTransAlta will operate the facility and Capital Power and TransAlta willindependently dispatch and market their share of the unit’s electricaloutput.  The Corporation will alsoprovide coal to the facility through the Highvale mine.

 

*Gasfired facilities*

* *

The following table summarizes the Corporation’s western Canadian gasfired generation facilities:

 
| **Location**       | ** ** | **Province** | ** ** | **Plant**          | ** ** | **Capacity  (MW)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry  Date** |
|--------------------|------------|--------------|------------|--------------------|------------|--------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|
| ** **         | ** ** | ** **   | ** ** | ** **         | ** ** | ** **         | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                 |
| Lloydminster       |       | SK           |       | Meridian           |       | 220                |       | 25                 |       | 1999                     |       | 2024                       |
| Fort  McMurray     |       | AB           |       | Poplar  Creek      |       | 356                |       | 100                |       | 2001                     |       | 2024                       |
| Fort  Saskatchewan |       | AB           |       | Fort  Saskatchewan |       | 118                |       | 30                 |       | 1999                     |       | 2019                       |
|               |       |         |       |               |       |               |       |               |       |                     |       |                       |
| **Total**          | ** ** | ** **   | ** ** | ** **         | ** ** | **694**            | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                 |

 

The Corporation’s interests in the Meridian and Fort Saskatchewanfacilities are held through TA Cogen.  See“TA Cogen”.

 

The Meridian plant is located in Lloydminster, Saskatchewan and isowned by TA Cogen and Husky Oil Operations Limited.  This 220 MW cogeneration plant sellselectricity to Saskatchewan Power Corporation, a Crown corporation owned by theProvince of Saskatchewan, and steam to a heavy oil upgrader in Lloydminster,Saskatchewan.

 

The Poplar Creek plant is located in Fort McMurray, Alberta and isowned by the Corporation.  This356 MW cogeneration plant became fully operational in the first quarter of2001 and delivers approximately 150 MW of electricity and steam to SuncorEnergy Inc. (“**Suncor**”).  Any surplus power not used by Suncor isavailable for sale by the Corporation to other parties, in which case Suncor isentitled to a share of that revenue, under certain conditions.

 

The Fort Saskatchewan plant is located in Fort Saskatchewan, Albertaand is owned by TA Cogen and Strongwater Energy Ltd. (purchased from AirLiquide Canada Inc. in 2009). The 118 MW Fort Saskatchewan gas firedcombined cycle cogeneration plant in Alberta provides electricity and steam toDow Chemical Canada Inc.

 

- 11 -

----

 

*Hydroelectricfacilities*

* *

The following table summarizes the Corporation’s western Canadianhydroelectric facilities:

 
| **Location**            | ** ** | **Province** | ** ** | **Plant**      | ** ** | **Capacity  (MW)****(1)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry  Date** |
|-------------------------|------------|--------------|------------|----------------|------------|---------------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|
| ** **              | ** ** | ** **   | ** ** | ** **     | ** ** | ** **                | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                 |
| Akolkolex  River System |       | BC           |       | Akolkolex      |       | 10                        |       | 100                |       | 1995                     |       | 2015                       |
|                    |       | BC           |       | Pingston       |       | 45                        |       | 50                 |       | 2003,  2004              |       | 2023                       |
| Mamquam  River System   |       | BC           |       | Upper  Mamquam |       | 25                        |       | 100                |       | 2005                     |       | 2025                       |
| Thompson  River System  |       | BC           |       | Bone  Creek(2) |       | 18                        |       | 100                |       | 2011                     |       | 2047                       |
| Bow  River System       |       | AB           |       | Horseshoe      |       | 14                        |       | 100                |       | 1911                     |       | 2020                       |
|                    |       | AB           |       | Kananaskis     |       | 19                        |       | 100                |       | 1913,  1951              |       | 2020                       |
|                    |       | AB           |       | Ghost          |       | 51                        |       | 100                |       | 1929,  1954              |       | 2020                       |
|                    |       | AB           |       | Cascade        |       | 36                        |       | 100                |       | 1942,  1957              |       | 2020                       |
|                    |       | AB           |       | Barrier        |       | 13                        |       | 100                |       | 1947                     |       | 2020                       |
|                    |       | AB           |       | Bearspaw       |       | 17                        |       | 100                |       | 1953,  1954              |       | 2020                       |
|                    |       | AB           |       | Pocaterra      |       | 15                        |       | 100                |       | 1955                     |       | 2013                       |
|                    |       | AB           |       | Interlakes     |       | 5                         |       | 100                |       | 1955                     |       | 2020                       |
|                    |       | AB           |       | Spray          |       | 103                       |       | 100                |       | 1951,  1960              |       | 2020                       |
|                    |       | AB           |       | Three  Sisters |       | 3                         |       | 100                |       | 1951                     |       | 2020                       |
|                    |       | AB           |       | Rundle         |       | 50                        |       | 100                |       | 1951,  1960              |       | 2020                       |
| North  Saskatchewan     |       | AB           |       | Brazeau        |       | 355                       |       | 100                |       | 1965,  1967              |       | 2020                       |
| River  System           |       | AB           |       | Bighorn        |       | 120                       |       | 100                |       | 1972                     |       | 2020                       |
| Oldman  River System    |       | AB           |       | Belly  River   |       | 3                         |       | 100                |       | 1991                     |       | -                          |
|                    |       | AB           |       | Waterton       |       | 3                         |       | 100                |       | 1992                     |       | -                          |
|                    |       | AB           |       | St.  Mary      |       | 2                         |       | 100                |       | 1992                     |       | -                          |
|                    |       | AB           |       | Taylor  Hydro  |       | 13                        |       | 50                 |       | 2000                     |       | -                          |
|                    |       |         |       |           |       |                      |       |               |       |                     |       |                       |
| **Total**               | ** ** | ** **   | ** ** | ** **     | ** ** | **920**                   | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                 |

 

**Notes:**

(1)                                  Megawatts are roundedto the nearest whole number.

(2)                                  Facility underconstruction reflects expected capacity and commissioning date.

 

The Corporation’s Bow River and North Saskatchewan River System hydroelectricfacilities are primarily peaking plants, meaning they are generally onlyoperated during times of peak demand, and all output from these facilities issold under one Alberta PPA.

 

Akolkolex River System

 

Akolkolex EcoPower® Centre is a run-of-river hydroelectric facilitywith installed capacity of 10 MW located on the Akolkolex River, south ofRevelstoke, British Columbia and is owned by the Corporation.  The output from the facility is sold to BCHydro.  Akolkolex has been operatingsince April 1995.

 

Pingston EcoPower® Centre is a run-of-river hydroelectric facility withinstalled capacity of 45 MW located on Pingston Creek, southwest ofRevelstoke, British Columbia and down river of Akolkolex.  The output from the facility is sold to BCHydro.  Pingston has been operating since2003 and is 50 per cent owned, via a joint venture, with a subsidiary ofBrookfield Renewable Power Inc.

 

Mamquam River System

 

Upper Mamquam EcoPower® Centre is a run-of river hydroelectric facilitywith installed capacity of 25 MW located on the Mamquam River, east ofSquamish, British Columbia, and north of Vancouver.  The output from the facility is sold to BCHydro.  Upper Mamquam has been operatingsince 2005.

 

- 12 -

----

 

Thompson River System

 

Bone Creek is a run-of-river hydroelectric facility currently underconstruction with expected capacity of 18 MW located on Bone Creek, northof Kamloops, near the town of Valemount, British Columbia.  Bone Creek is expected to commence commercialoperations in the first quarter of 2011.

 

Bow River System

 

Horeshoe is a run-of-river hydroelectric facility with installedcapacity of 14 MW located in Seebe, Alberta. The plant is owned by theCorporation and has been operating since 1911.

 

Kananaskis is a run-of-river hydroelectric facility with installedcapacity of 19 MW located in Seebe, Alberta. The plant is owned by theCorporation. The plant has been operating since 1913 and was expanded in 1951and modified again in 1994.

 

Ghost is a hydroelectric facility with installed capacity of 51 MWlocated on the Bow River in Cochrane, Alberta. The plant is owned by theCorporation and has been operating since 1929.

 

Cascade is a hydroelectric facility with installed capacity of36 MW located on the Cascade River in Banff National Park, Alberta. Theplant is owned by the Corporation and was purchased from the Government ofCanada in 1941. The following year, TransAlta built a new dam and power plantto replace the original, the Corporation then added a second generating unit in1957.

 

Barrier is a run-of-river hydroelectric facility with installedcapacity of 13 MW located in Seebe, Alberta. The plant is owned by theCorporation and has been operating since 1947.

 

Bearspaw is a hydroelectric facility with installed capacity of17 MW located on the Bow River in Calgary, Alberta. The plant is owned bythe Corporation and has been operating since 1954.

 

Pocaterra is a hydroelectric facility with installed capacity of15 MW located in Kananaskis, Alberta. The plant is owned by theCorporation and has been operating since 1955.

 

Interlakes is a hydroelectric facility with installed capacity of5 MW located in Kananaskis, Alberta. The plant is owned by the Corporationand has been operating since 1955.

 

Spray is a hydroelectric facility with installed capacity of103 MW located in Canmore, Alberta on the Spray system.  The plant uses water from the Spray LakesStorage Reservoir. The plant is owned by the Corporation and has been operatingsince 1951.

 

Three Sisters is a hydroelectric facility with installed capacity of3 MW located at the base of the Three Sisters Dam in Canmore, Alberta onthe Spray system. The plant uses water from the Spray Lakes Storage Reservoir.The plant is owned by the Corporation and has been operating since 1951.

 

Rundle is a hydroelectric facility with installed capacity of50 MW located in Canmore, Alberta on the Spray system.  The plant uses water from the Spray Lakes StorageReservoir, which was created by the Canyon Dam to the south, and the ThreeSisters dam to the north. The plant is owned by the Corporation and has beenoperating since 1951.

 

North Saskatchewan River System

 

Brazeau is a hydroelectric facility with installed capacity of355 MW located in Drayton Valley, Alberta. The plant is owned by theCorporation and has been operating since 1965.

 

Bighorn is a hydroelectric facility with installed capacity of120 MW located in Nordegg, Alberta. The plant is owned by the Corporationand has been operating since 1972.

 

- 13 -

 

----

 

Oldman River System

 

Belly River EcoPower® Centre is a run-of river hydroelectric facilitywith installed capacity of 3 MW located on the Waterton-St. Mary HeadworksIrrigation Canal System, east of the Waterton Reservoir, approximately75 kilometres southwest of Lethbridge in southern Alberta.  Due to its location along the irrigationcanal, Belly River operates from April to October when water isdiverted through the canal as part of the St. Mary Irrigation District WaterManagement Plan.  Belly River has beenoperating since March 1991. Generation from the facility is sold in the Alberta spot market.

 

Waterton EcoPower® Centre is a run-of-river hydroelectric facility withinstalled capacity of 3 MW located at the base of the Waterton Dam on theWaterton Reservoir, near Hillspring, southwest of Lethbridge, Alberta.  Waterton has been operating since November 1992.  Generation from the facility is sold in theAlberta spot market.

 

St. Mary EcoPower® Centre is a run-of-river hydroelectric facility withinstalled capacity of 2 MW located at the base of the St. Mary Dam on theWaterton Reservoir, near Magrath, in southern Alberta.  St. Mary has been operating since December 1992.  Generation from the facility is sold in theAlberta spot market.

 

Taylor EcoPower® Centre consists of separate hydroelectric and windfacilities.  The hydroelectric facility (“**Taylor Hydro**”) is a run-of-river facility with installedcapacity of 13 MW and is located adjacent to the Taylor Coulee Chute onthe Waterton-St. Mary Headworks Irrigation Canal System which is owned by theGovernment of Alberta.  Taylor Hydro hasoperated since May 2000, and is jointly owned by the Corporation alongwith Capital Power.  Generation from thefacility is sold in the Alberta spot market.

 

*WindGeneration Facilities*

* *

The Corporation owns and operates approximately 972 MW of net windgeneration capacity (excluding facilities under development) primarily in 12wind farms in western Canada, three in Ontario, one in Québec and one in NewBrunswick.

 

As well as contracting for power, TransAlta enters into long-term andshort-term contracts to sell the environmental attributes from our merchantwind and hydro facilities.  Theseactivities help to ensure earnings consistency from these assets.  For 2010, TransAlta has sold approximately 70per cent of the environmental attributes from our merchant wind facilities and100 per cent of the environmental attributes from our merchant hydrofacilities.  Generally, for facilitiesunder long term contract, the benefit of the environmental attributes generatedflow through to the contract holder.

 

The following table summarizes the Corporation’s western Canadian windgeneration facilities:

 
| **Location**   | ** ** | **Province** | ** ** | **Plant**        | ** ** | **Capacity  (MW)****(1)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry  Date** |
|----------------|------------|--------------|------------|------------------|------------|---------------------------|------------|--------------------|------------|--------------------------|------------|----------------------------|
| ** **     | ** ** | ** **   | ** ** | ** **       | ** ** | ** **                | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                 |
| Fort  Macleod  |       | AB           |       | McBride  Lake    |       | 75                        |       | 50                 |       | 2003                     |       | 2024                       |
| Pincher  Creek |       | AB           |       | MacLeod  Flats   |       | 3                         |       | 100                |       | 2004                     |       | -                          |
| Pincher  Creek |       | AB           |       | Ardenville(2)    |       | 69                        |       | 100                |       | 2011                     |       | -                          |
| Pincher  Creek |       | AB           |       | Castle  River    |       | 44                        |       | 100                |       | 1997-2001                |       | 2011                       |
| Pincher  Creek |       | AB           |       | Summerview  1    |       | 70                        |       | 100                |       | 2004                     |       | -                          |
| Fort  Macleod  |       | AB           |       | Blue  Trail      |       | 66                        |       | 100                |       | 2009                     |       | -                          |
| Pincher  Creek |       | AB           |       | Summerview  2(2) |       | 66                        |       | 100                |       | 2010                     |       | -                          |
| Pincher  Creek |       | AB           |       | Cowley  Ridge    |       | 21                        |       | 100                |       | 1993                     |       | -                          |
| Waterton       |       | AB           |       | Taylor  Wind     |       | 3                         |       | 100                |       | 2004                     |       | -                          |
| Pincher  Creek |       | AB           |       | Cowley  North    |       | 20                        |       | 100                |       | 2001                     |       | -                          |
| Pincher  Creek |       | AB           |       | Sinnott          |       | 7                         |       | 100                |       | 2001                     |       | -                          |
| Pincher  Creek |       | AB           |       | Soderglen        |       | 71                        |       | 50                 |       | 2006                     |       | -                          |
|           |       |         |       |             |       |                      |       |               |       |                     |       |                       |
| **Total**      | ** ** | ** **   | ** ** | ** **       | ** ** | **515**                   | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                 |

 

**Notes:**

(1)                                  Megawatts are rounded to thenearest whole number.

(2)                                  Facility under development reflectsexpected capacity and commissioning date.

 

- 14 -

----

 

McBride Lake is a 75 MW wind farm comprised of 114 Vestas V47 (660kW) turbines located at Fort MacLeod, Alberta. It was constructed by the Corporation and has been producing electricitysince the third quarter of 2003.  McBrideLake is operated by the Corporation and is owned by the Corporation and ENMAXGreen Power Inc.  The output from thefacility is 100 per cent contracted in the form of a 20 year LTC with ENMAXEnergy Corp. (“**ENMAX**”).  The Corporation is also entitled to receiveWind Power Production Incentive (“**WPPI**”) paymentsfrom the federal government at $12/MWh in respect of the McBride Lake facilityuntil 2013.  The Corporation also owns100 per cent of the 0.7 MW McBride Lake East facility in the samevicinity.

 

Macleod Flats consists of a single Vestas V90 3 MW turbine and islocated near Fort Macleod.  It wascommissioned in 2004 and was purchased by TransAlta in 2009.

 

On April 28, 2009, the Corporation announced plans to design,build and operate a 69 MW wind power project in southern Alberta (“**Ardenville**”).  Thecapital cost of the Ardenville project is estimated at $135 million, whichincludes the purchase of an already operational 3 MW turbine at MacleodFlats.  Commercial operations of theremainder of the Ardenville wind project is expected to commence in the firstquarter of 2011, and the output will be sold in the spot market.

 

Castle River is a 40 MW wind farm comprised of 59 Vestas V47 (660kW) turbines and 1 Vestas V44 (600 kW) turbine located at Pincher Creek,Alberta.  The facility is 71 per centcontracted primarily to ENMAX and is the sole Green Energy® provider to theCity of Calgary’s “Ride the Wind” Light Rail Transit program.  The Corporation also owns and operates sevenadditional turbines totalling 4 MW located individually in the CardstonCounty and Hillspring areas of southwestern Alberta.

 

Summerview is a 68 MW wind farm comprised of 38 1.8MW turbines andis located approximately 15 kilometres northeast of Pincher Creek,Alberta.  It was constructed by theCorporation and commenced commercial operations in 2004.  The Summerview facility, together with anexisting 1.8 MW turbine in the area, brings the total wind generationcapacity at that location to 70 MW. The Summerview wind farm is a merchant facility but is entitled toreceive WPPI payments from the federal government at $10/MWh until 2014.

 

Blue Trail is a 66 MW wind farm comprised of 22 Vestas V903 MW turbines located in southern Alberta which commenced commercialoperations in November 2009.  Thetotal capital cost for this wind power project was $115 million.  The capacity from this project is sold on theAlberta Power Pool.  The Blue Trail windfarm is entitled to receive payments from Natural Resources Canada (“**NRCan**”), a division of the federal government, through theeco Energy for Renewable Power (“**eERP**”) program.

 

On May 27, 2008, the Corporation announced that it would beconstructing another 66 MW wind generation facility in southern Alberta,consisting of 22 Vestas V90 3 MW wind turbines.  The total capital costs for this expansion ofthe Summerview 2 wind power project is expected to be $123 million.  The capacity from this project is expected tobe sold on the Alberta Power Pool.  TheSummerview 2 wind farm expansion is entitled to receive payments from NRCanthrough the eERP program.

 

Cowley Ridge EcoPower® Centre **(“Cowley Ridge**”)has total installed capacity of 21 MW and is located near the towns ofCowley and Pincher Creek, in southern Alberta. Cowley Ridge and Cowley expansion are 100 per cent owned by theCorporation, and are comprised of two parts: Cowley Ridge, which became operational in 1993, and the Cowley Expansionbecame operational in 1994.  Generationfrom this facility is sold in the Alberta spot market.

 

Taylor EcoPower® Centre wind facility (“**Taylor Wind**”)has total installed capacity of 3 MW and is located adjacent to TaylorHydro.  Taylor Wind began commercialoperations in December 2004 and is owned by the Corporation.  Generation from this facility is sold in theAlberta spot market.

 

Cowley North EcoPower® Centre (“**Cowley North**”)and Sinnott EcoPower® Centre (“**Sinnott**”) havea total installed capacity of 20 MW and 7 MW at Sinnot and are located adjacentto Cowley Ridge and directly east of Cowley Ridge, respectively.  Cowley North and Sinnott began operations inthe fall of 2001 and are 100 per cent owned by the Corporation.  Generation from this facility is sold in theAlberta spot market.

 

- 15 -

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Soderglen EcoPower® Centre (“**Soderglen**”) isa 71 MW facility located in southern Alberta, southwest of Fort Macleod and 40kilometres from the Corporation’s wind operations near Pincher Creek.  This 71 MW facility is 50 per cent ownedby the Corporation and 50 per cent owned by Nexen Inc.  Commercially operational in September 2006,Soderglen has a total installed capacity of 71 MW.  Generation from this facility is sold in theAlberta spot market.

 

All of the electricity generated and sold by the Corporation’s winddivision, with the exception of Blue Trail, Macleod Flats, theSummerview 2 (under construction), a 2.5 MW expansion of CowleyRidge, and Taylor Wind, is generation from facilities that are EcoLogocertified. The Corporation is an EcoLogo certified distributor of AlternativeSource Electricity through Environment Canada’s Environmental Choiceprogram.  EcoLogo certification isgranted to products with environmental performance that meet or exceed allgovernment, industrial safety and performance standards.

 

*BiomassFacilities*

* *

Grande Prairie EcoPower® Centre (“**GPEC**”) is abiomass co-generation facility with an installed capacity of 25 MW and islocated adjacent to Canadian Forest Products Ltd.’s Grande Prairie Sawmill inthe city of Grande Prairie, in northern Alberta.  GPEC became commercially operational in2005.  Generation from GPEC is sold toCanadian Forest Products Ltd., Alberta Infrastructure and the City of Grande Prairie.

 

*AlbertaPPAs*

* *

All of the Corporation’s Alberta thermal and hydroelectric facilities,other than the Wabamun, Genesee 3, Belly River, Waterton, St. Mary andTaylor facilities, and uprated capacity, operate under Alberta PPAs.  The Alberta PPAs establish committed capacityand electrical energy generation requirements and availability targets to beachieved by each thermal plant, energy and ancillary services obligations forthe hydroelectric plants, and the price at which electricity is to be supplied.  The Corporation bears the risk or retains thebenefit of volume variances (except for those arising from events considered tobe force majeure, in the case of the thermal plants) and any change in costs(unless due to a change in law) required to maintain and operate thefacilities.

 

Under the Alberta PPAs, for the formerly regulated thermal facilities,the Corporation is exposed to electricity price risk if availability declinesbelow contracted levels (other than as a result of outages caused by an eventof force majeure).  In suchcircumstances, the Corporation must pay a penalty for the lost availabilitybased upon a price equal to the 30 day rolling average of Alberta’s marketelectricity prices.  This rolling averageprovision attempts to mitigate price spikes that can occur as a result ofsudden outages.  The Corporation attemptsto further mitigate this exposure by maintaining contracted and uncontractedcapacity in the market, through operating and maintenance practices, andthrough hedging activities.

 

The Corporation’s hydroelectric facilities, other than Belly River,Waterton, St. Mary and Taylor Hydro, are not contracted on a facility byfacility basis; rather, facilities are aggregated in a single Alberta PPA whichprovides for financial obligations for energy and ancillary services based onhourly targets.  These targeted amountsare met by the Corporation through physical delivery or third party purchases.

 

The Corporation’s compensation under the Alberta PPAs is based on apricing formula which replaced the cost of service regime that appliedpreviously under utility regulation.  Keyelements of the pricing formula are the amount of common equity deemed to formpart of the capital structure, the amount of risk premium attributable todeemed common equity and a recovery of fixed and variable costs.  Common equity is deemed to be 45 per cent oftotal capital and the return on equity is set annually at a 4.5 per centpremium over the rate on a 10 year Government of Canada Bond.

 

The pricing formula includes a provision for site restoration costs ofthe thermal generating plants for the whole term of the PPA.  If the costs recovered are insufficient, thenthe Corporation can apply to the Balancing Pool to recover the incrementalportion.  The Alberta PPAs include, aspart of the capacity payment for hydroelectric operations, an amount fordecommissioning.

 

The expiry dates for the Corporation’s Alberta PPAs, range from 2013 to2020.  With the expiry of the PPA at theWabamun facility, the Corporation procured an extension of the license tooperate Unit 4 of the Wabamun facility until March 31, 2010, andsince the extension has sold most of the electricity from the Wabamun facilityon the spot market.  

 

- 16 -

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The Corporation is evaluating the economics of running assets post PPAexpiry.  Upon the expiry of the PPAs andsubject to procuring an extension of the licenses, if required, the Corporationwill then be able to sell its electricity to the Alberta Power Pool and tothird party purchasers through direct sales agreements.

 

The Alberta PPAs (together with legislation which applies thereto)permit the Balancing Pool, directly or indirectly as successor to the powerpurchaser under the Alberta PPAs, to terminate the Alberta PPAs in certaincircumstances.  These terminationprovisions are similar to those found in some PPAs entered into by governmentrelated power purchasers.  TheCorporation will be entitled to receive a lump sum payment in connection withany such termination, other than a termination resulting from the Corporation’sdefault, and will thereafter be able to sell the output from any affectedfacilities for its own account.

 

**Canada: Eastern Canada**

** **

*Gas-firedfacilities*

* *

The Corporation’s Ontario gas-fired generating facilities aresummarized in the following table:

 
| **Location** | ** ** | **Province** | ** ** | **Plant**   | ** ** | **Capacity  (MW)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry Date** |
|--------------|------------|--------------|------------|-------------|------------|--------------------|------------|--------------------|------------|--------------------------|------------|---------------------------|
|         |       |         |       |        |       |               |       |               |       |                     |       |                      |
| Sarnia       |       | ON           |       | Sarnia      |       | 506                |       | 100                |       | 2003                     |       | 2022-2025                 |
| Ottawa       |       | ON           |       | Ottawa      |       | 68                 |       | 50                 |       | 1992                     |       | 2012                      |
| Mississauga  |       | ON           |       | Mississauga |       | 108                |       | 50                 |       | 1992                     |       | 2017                      |
| Windsor      |       | ON           |       | Windsor     |       | 68                 |       | 50                 |       | 1996                     |       | 2016                      |
|         |       |         |       |        |       |               |       |               |       |                     |       |                      |
| **Total**    | ** ** | ** **   | ** ** | ** **  | ** ** | **750**            | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                |

 

The Sarnia plant is a combined cycle cogeneration facility which isowned by the Corporation.  The Corporationacquired 135 MW of existing electric and steam generation capacity in2002, and in March 2003 the Corporation completed construction andcommissioning on a new 440 MW facility. In 2009, the Corporation decommissioned and removed a 69 MW gas turbine.  The 506 MW Sarnia facility providessteam and electricity to nearby industrial facilities owned by LANXESS(formerly Bayer Inc.), Nova Chemicals (Canada) Ltd. (which in turn suppliesINEOS NOVA) and Suncor Energy Products Inc. On February 15, 2006, TransAlta announced that it had signed a fiveyear agreement with the OPA for generation from its Sarnia facility.  Subsequently, the Ontario Minister of Energyand Infrastructure directed the OPA to seek contracts with TransAlta andcertain over “Early Movers” on a term and under conditions more in keeping withthose contracts it was offering to new facilities. In September 2009,TransAlta concluded a contract with the OPA, effective as of July 1, 2009and terminating on December 31, 2025 under more favourable terms. This newagreement brings the combined total term contracted with the OPA to 20 years.The new contract also includes provisions to share the impact and benefit ofchanges in customer steam load or the loss of a steam customer.

 

The Ottawa plant is owned by TA Cogen. It is a combined cycle cogeneration facility designed to produce68 MW of electrical energy.  Thiscapacity is sold under a long term contract with the Ontario ElectricityFinancial Corporation (“**OEFC**”), anagency of the Province of Ontario.  Thisagreement expires in 2012.  The Ottawaplant also provides thermal energy to the member hospitals and treatmentcenters of the Ottawa Health Sciences Centre, National Defence Medical Centreand the Perley and Rideau Veterans’ Health Centre.

 

The Mississauga plant is owned by TA Cogen.  It is a combined cycle cogeneration facilitydesigned to produce 108 MW of electrical energy.  This capacity is contracted under a long termcontract with the OEFC which expires in 2017. The Mississauga Plant provided cogeneration services to Boeing CanadaInc. (“**Boeing**”) until July 2005 at whichtime Boeing exercised its right under the cogeneration services agreement to nolonger take and pay for cogeneration services due to the closure of itsmanufacturing facility.  Boeing remainsentitled to any steam credits based on the total plant electricity generationrevenue.  On or prior to each of January 1,2013, 2018 and 2023, Boeing may give notice of its intention to continue topurchase, or discontinue, cogeneration services.  In addition, on those same dates, Boeing hasthe option to require the removal of the Mississauga Plant from the leasedlands or purchase the Mississauga Plant at its net salvage value.

 

- 17 -

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The Windsor plant is owned by TA Cogen. It is a combined cycle cogeneration facility designed to produce68 MW of electrical energy. Currently, 50 MW of the capacity is sold under a long term contractto the OEFC.  This agreement expires in2016.  The Windsor plant also providesthermal energy to Chrysler Canada Inc.’s minivan assembly facility inWindsor.  In 2003, an agreement wasreached with the OEFC to sell the remaining 18 MW to the Ontario powermarket when it is economic to do so.

 

*Hydroelectricfacilities*

* *

The Corporation’s Ontario hydro-electric facilities are summarized inthe following table:

 
| **Location**                | ** ** | **Province** | ** ** | **Plant**     | ** ** | **Capacity  (MW)****(1)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry Date** |
|-----------------------------|------------|--------------|------------|---------------|------------|---------------------------|------------|--------------------|------------|--------------------------|------------|---------------------------|
| ** **                  | ** ** | ** **   | ** ** | ** **    | ** ** | ** **                | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                |
| Montréal  River System |       | ON           |       | Ragged  Chute |       | 7                         |       | 100                |       | 1991                     |       | 2011                      |
| Wanapiki  River System      |       | ON           |       | Moose  Rapids |       | 1                         |       | 100                |       | 1997                     |       | 2011                      |
| Mississippi  River System   |       | ON           |       | Appleton      |       | 1                         |       | 100                |       | 1994                     |       | 2011                      |
| Mississippi  River System   |       | ON           |       | Galetta       |       | 2                         |       | 100                |       | 1998                     |       | 2011                      |
| Misema  River System        |       | ON           |       | Misema        |       | 3                         |       | 100                |       | 2003                     |       | 2027                      |
|                        |       |         |       |          |       |                      |       |               |       |                     |       |                      |
| **Total**                   | ** ** | ** **   | ** ** | ** **    | ** ** | **14**                    | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                |

 

**Note:**

(1)                                  Megawatts are rounded to thenearest whole number.

 

Ragged Chute EcoPower® Centre (“**Ragged Chute**”)is a run-of-river hydroelectric facility with installed capacity of 7 MWlocated on the Montreal River, south of New Liskeard, in northern Ontario.  Ragged Chute is 100 per cent owned by theCorporation.  Generation from thisfacility is sold to Constellation Newenergy Canada, Inc.****(“**Constellation**”).** **Ragged Chute hasbeen operating since 1991.

 

Moose Rapids EcoPower® Centre (“**Moose Rapids**”)is a run-of-river hydroelectric facility with installed capacity of 1 MWlocated on the Wanapitei River, near Sudbury, in northern Ontario.  Moose Rapids is 100 per cent owned by theCorporation.  Generation from this facilityis sold to Constellation.  Moose Rapidshas been operating since 1997.

 

Appleton EcoPower® Centre (“**Appleton**”) is arun-of-river hydroelectric facility with installed capacity of 1 MWlocated on the Mississippi River, near Appleton, Ontario.  Appleton is 100 per cent owned by theCorporation.  Generation from thisfacility is sold to Constellation. Appleton has been operating since 1994.

 

Galetta EcoPower® Centre (“**Galetta**”) is arun-of-river hydroelectric facility with installed capacity of 2 MW alsolocated on the Mississippi River, near Appleton, Ontario.  Galetta is 100 per cent owned by theCorporation.  Galetta was originallybuilt in 1907 and was retrofitted in 1998. Generation from this facility is sold to Constellation.

 

Misema EcoPower® Centre (“**Misema**”) is arun-of river hydroelectric facility with installed capacity of 3 MWlocated on the Misema River, close to Englehart, in northern Ontario.  Misema is 100 per cent owned by theCorporation.  Generation from thisfacility is sold to Constellation. Misema has been operating since 2003.

 

- 18 -

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*WindGeneration Facilities*

* *

The Corporation’s Ontario, Québec and New Brunswick wind generationfacilities are summarized in the following table:

 
| **Location**                       | ** ** | **Province** | ** ** | **Plant**          | ** ** | **Capacity  (MW)****(1)** | ** ** | **Ownership    (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry Date** |
|------------------------------------|------------|--------------|------------|--------------------|------------|---------------------------|------------|----------------------|------------|--------------------------|------------|---------------------------|
|                               |       |         |       |               |       |                      |       |                 |       |                     |       |                      |
| Melancthon  Township               |       | ON           |       | Melancthon I  |       | 68                        |       | 100                  |       | 2006                     |       | 2026                      |
| Melancthon  and Amaranth Townships |       | ON           |       | Melancthon II |       | 132                       |       | 100                  |       | 2008                     |       | 2028                      |
| Kingston                           |       | ON           |       | Wolfe  Island      |       | 198                       |       | 100                  |       | 2009                     |       | 2029                      |
| Québec                        |       | QC           |       | Le  Nordais        |       | 99                        |       | 100                  |       | 1999                     |       | 2033                      |
| New  Brunswick                     |       | NB           |       | Kent  Hills        |       | 96                        |       | 83                   |       | 2008                     |       | 2033                      |
| New  Brunswick                     |       | NB           |       | Kent  Hills(2)     |       | 54                        |       | 100                  |       | 2010                     |       | 2035                      |
| ** **                         | ** ** | ** **   | ** ** | ** **         | ** ** | ** **                | ** ** | ** **           | ** ** | ** **               | ** ** | ** **                |
| **Total**                          | ** ** | ** **   | ** ** | ** **         | ** ** | **647**                   | ** ** | ** **           | ** ** | ** **               | ** ** | ** **                |

 

**Notes:**

(1)                                  Megawatts are rounded to thenearest whole number.

(2)                                  Includes the Kent Hills expansionfacility under construction and expected commissioning date.

 

Melancthon I EcoPower® Centre (“**Melancthon I**”)has total installed capacity of 68 MW and is located in Melancthon Townshipnear Shelburne, Ontario. Melancthon I became commercially operational on March 4,2006.  Generation from this facility issold to the Ontario Power Authority (the “**OPA**”).

 

Melancthon II is a 132 MW wind project located adjacent toMelancthon I, in Melancthon and Amaranth Townships.  Together, Melancthon I and II are knownas the Melancthon EcoPower® Centre. Melancthon II achieved commercial operations on November 24,2008.  Generation from this facility issold to the OPA.

 

The Wolfe Island Wind Project is located on Wolfe Island, nearKingston, Ontario. This project’s key components include 86, 2.3 MWSiemens wind turbines, low voltage collector system and a high voltagetransmission system, a 34.5 / 340 kV transformer station, and an operations andmaintenance building.  This facility isowned by the Corporation, and commenced commercial operation on June 26,2009. Generation from this facility is sold to the OPA.

 

Le Nordais EcoPower® Centre (“**Le Nordais**”) islocated at two sites:  Cap-Chat (56.25 MWinstalled capacity, 75 turbines); and Matane (42.75 MW installed capacity,57 turbines).  Le Nordais is on the GaspéPeninsula of Québec. Production from this facility is sold to Hydro-Québec.  Le Nordais has been commercially operationalsince 1999.

 

Kent Hills is located in Kent Hills, New Brunswick, and is a 75 MW ofwind power facility with output sold under a 25 year LTC with New BrunswickPower.

 

On January 19, 2007, the Corporation announced that it had beenawarded a 25 year LTC to deliver 75 MW of wind power to New BrunswickPower.  On July 17, 2007, theCorporation announced it had amended its LTC with New Brunswick Power from75 MW to 96 MW bringing the total capital cost for the project to anestimated $170 million.  The projectwas completed by the end of 2008.  Theproject was completed by the end of 2008. Natural Forces Technologies Inc. (“**Natural Forces**”),an Atlantic Canada based wind developer, is TransAlta’s co development partnerin this project and Natural Forces exercised its option to purchase up to 17per cent of the Kent Hills project in May 2009.

 

On January 11, 2010, the Corporation announced that it had beenawarded another 25 year LTC to expand the existing Kent Hills project by54 MW of wind power to New Brunswick Power with a further capital cost ofan estimated $100 million.  Theproject is scheduled to be completed by the end of 2010.

 

- 19 -

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** **

**TA Cogen**

** **

The Corporation’s interest in the 220 MW Meridian natural gasfired generation facility in Saskatchewan, the 780 MW Sheerness thermalgeneration facility, the 118 MW Fort Saskatchewan gas fired cogenerationfacility in Alberta, and the Mississauga, Ottawa and Windsor Essex facilitiesin Ontario, are held through TA Cogen, an Ontario limited partnership owned50.01 per cent by subsidiaries of TransAlta and 49.99 per cent by Stanley PowerInc., a subsidiary of Cheung Kong Infrastructure Holdings Limited.

 

**United States**

** **

The Corporation’s generation facilities in the United States aresummarized in the following table:

 
| **Location**     | ** ** | **State**  | ** ** | **Plant**                  | ** ** | **Capacity  (MW)** | ** ** | **Ownership  (%)** | ** ** | **Commissioning  Dates** | ** ** | **Contract  Expiry Date** |
|------------------|------------|------------|------------|----------------------------|------------|--------------------|------------|--------------------|------------|--------------------------|------------|---------------------------|
|             |       |       |       |                       |       |               |       |               |       |                     |       |                      |
| Centralia        |       | WA         |       | Centralia  Coal No. 1 |       | 688                |       | 100                |       | 1971                     |       | -                         |
|             |       |       |       | Centralia  Coal No. 2 |       | 688                |       | 100                |       | 1971                     |       | -                         |
|             |       |       |       | Centralia  Gas             |       | 248                |       | 100                |       | 2002                     |       | -                         |
|             |       |       |       | Skookumchuk                |       | 1                  |       | 100                |       | 1970                     |       | -                         |
| Saranac          |       | NY         |       | Saranac                    |       | 240                |       | 37.5               |       | 1994                     |       | -                         |
| Imperial  Valley |       | CA         |       | Vulcan                     |       | 34                 |       | 50                 |       | 1986                     |       | 2016                      |
|             |       |       |       | Del  Ranch                 |       | 38                 |       | 50                 |       | 1989                     |       | 2018                      |
|             |       |       |       | Elmore                     |       | 38                 |       | 50                 |       | 1989                     |       | 2018                      |
|             |       |       |       | Leathers                   |       | 38                 |       | 50                 |       | 1990                     |       | 2019                      |
|             |       |       |       | CE  Turbo                  |       | 10                 |       | 50                 |       | 2000                     |       | 2029                      |
|             |       |       |       | Salton  Sea I              |       | 10                 |       | 50                 |       | 1987                     |       | 2017                      |
|             |       |       |       | Salton  Sea II             |       | 20                 |       | 50                 |       | 1990                     |       | 2020                      |
|             |       |       |       | Salton  Sea III            |       | 50                 |       | 50                 |       | 1989                     |       | 2019                      |
|             |       |       |       | Salton  Sea IV             |       | 40                 |       | 50                 |       | 1996                     |       | 2026                      |
|             |       |       |       | Salton  Sea V              |       | 49                 |       | 50                 |       | 2000                     |       | 2020                      |
| Big  Springs     |       | TX         |       | Power Resources            |       | 212                |       | 50                 |       | 1988                     |       | -                         |
| Yuma             |       | AZ         |       | Yuma                       |       | 50                 |       | 50                 |       | 1994                     |       | 2024                      |
| Hilo             |       | HI         |       | Wailuku                    |       | 10                 |       | 50                 |       | 1993                     |       | 2023                      |
|             |       |       |       |                       |       |               |       |               |       |                     |       |                      |
| **Total**        | ** ** | ** ** | ** ** | ** **                 | ** ** | **2,464**          | ** ** | ** **         | ** ** | ** **               | ** ** | ** **                |

 

*Centralia*

* *

The Corporation owns a two unit 1,376 MW thermal facility and a248 MW gas fired facility in Centralia, Washington, located south ofSeattle.  The Corporation also owns a1 MW hydro electric generating facility on the Skookumchuk River nearCentralia, and related assets which are used to provide water supply to TransAlta’sother generation facilities at Centralia.

 

The Corporation has entered into a number of medium to long term energysales agreements from the Centralia facility. The Corporation also sells electricity from the Centralia facility intothe Western Electricity Coordinating Council and, in particular, on the spotmarket in the U.S. Pacific Northwest energy market.  The Corporation’s strategy is to balancecontracted and non contracted sales of electricity to manage production andprice risk.

 

TransAlta also owns a coal mine adjacent to the Centralia facility. TheCorporation stopped mining operations at its Centralia coal mine on November 27,2006.  Prior to that date, the Centraliamine produced approximately five to six million tons of coal annually, orapproximately 70 to 85 per cent of the Centralia plant’s annual coalrequirements.  Although the Corporationestimates that certain coal reserves remain to be extracted, the Corporationhas not yet received permits for, nor developed the new area, from which thiscoal could be produced.  The Corporationhas entered into contracts to purchase and transport coal from the Powder RiverBasin in Montana and Wyoming to fuel its facility until such time, if any, asit is economic to pursue the extraction of coal at its Centralia mine.

 

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During 2009, we wrote down the mining development costs incurredrelated to the Westfield project.  Thesecosts were carried from the shutdown of the Centralia mine as the Corporationcontinued to develop mining plans and longer term operation performance ofCentralia Thermal.  As a result of theseplans being put on indefinite hold, these costs were written off.

 

*CEGeneration*

* *

TransAlta owns 50 per cent of CE Generation.  CE Generation, through its subsidiaries, is primarilyengaged in the development, ownership and operation of independent powerproduction facilities in the United States using geothermal and natural gasresources.  CE Generation holds a netownership interest of approximately 385 MW in 13 facilities, having anaggregate operating capacity of 829 MW, including 327 MW ofgeothermal generation in California and 502 MW of gas fired cogenerationin New York State, Texas and Arizona.

 

CE Generation affiliates operate the 10 geothermal facilities locatedin the Imperial Valley, California.  Eachof the geothermal facilities sells electricity pursuant to independent, longterm contracts.

 

CE Generation affiliates also operate three natural gas firedfacilities in Texas, Arizona and New York State, having an aggregate generationcapacity of 502 MW.  The Arizonafacility sells its output pursuant to long term contracts while the Texasfacility sold its output in 2009 under a tolling agreement, but has since movedto selling its output in the spot market. The New York facility operates an energy management agreement with athird party who is responsible for marketing the output from the facility andin return, the owners receive a fixed capacity payment and 80 per cent ofdispatch revenue.

 

*Wailuku*

* *

On February 17, 2006, a subsidiary of TransAlta, together with asubsidiary of MidAmerican Energy Holdings Company****enteredinto an arrangement to purchase a 10 MW hydro facility in Hawaii to beheld directly by the Wailuku Holding Company LLC.  Each of TransAlta and Mid American hold a 50per cent interest in the facility.  Thefacility sells electricity pursuant to the terms of a 30 year long termcontract with the Hawaii Electricity Light Company.

 

**Australia**

** **

The Corporation holds interests in Western Australia consisting of the110 MW Parkeston generation facility through a 50/50 joint venture with NPKalgoorlie Pty Ltd., a subsidiary of Newmont Australia Limited, and the245 MW Southern Cross Energy gas and diesel generation facilities.  Most of TransAlta’s generation supplies twolarge mining companies through long term capacity contracts and the remainingamount of surplus energy and capacity is sold into Australia’s WholesaleElectricity Market.

 

**Commercial Operations and Development**

** **

The Commercial Operations and Development group provides a number ofstrategic functions to the Corporation, including the following:

 

·                                          Gathering and assessing marketintelligence, enabling management to more effectively engage in strategicplanning and decision making for the Corporation.  This includes identifying and ranking energymarkets which are the most attractive to enter, and developing strategies andplans to effectively compete in each market where the Corporation operates;

 

·                                          Negotiating and entering intocontractual agreements with customers for the sale of output from theCorporation’s generation assets, including electricity, steam or other energyrelated commodities;

 

·                                          Negotiating and managing fuelsupply arrangements with third parties for the Corporation’s generation assets;

 

- 21 -

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·                                         Scheduling physical deliveriesof natural gas supplies used to generate electricity and the electricalgeneration outputs from each asset to meet contractual obligations whilemanaging the physical and financial risks associated with the generation and transmissionof electrical energy, including during periods of unplanned outages;

 

·                                          Increasing the value ofelectricity output and fuel inputs from each generating asset through a varietyof regional portfolio optimization strategies in both the current year and overthe long term; and

 

·                                          Recommending optimummaintenance schedules and operating levels according to current and anticipatedmarket conditions that will maximize earnings from each of the generationassets.

 

Beyond these functions, the Commercial Operations and Development groupderives additional revenue and earnings from the wholesale trading ofelectricity and other energy related commodities and derivatives.

 

The group seeks to manage and limit risk exposures from both financialand physical positions, as well as counterparty risks.  The key risk control activities of theCommercial Operations and Development group, in conjunction with otherfunctions of the Corporation, include credit review approval and reporting,risk measurement monitoring and reporting, validation of transactions, andtrading portfolio valuation monitoring and reporting.

 

The Corporation uses mark to market valuation and the application of avalue at risk (“**VAR**”) determination for riskcontrol practices for its trading portfolios. This approach is a measure of assessing the potential trading lossesthat the Corporation could experience over a given time, due to fluctuations inenergy prices in each market.  TheCorporation’s policy is to actively manage and limit the group’s aggregate VARexposure within board approved limits.

 

**Competitive Environment**

** **

TransAlta is the largest generator of electricity in Alberta, measuredby capacity, and has a significant portfolio of generation assets in thePacific Northwest and the western U.S. The Corporation also owns and operates generating assets in BritishColumbia, Ontario, Québec, New Brunswick and Australia.

 

The Corporation expects electricity demand to grow as the currentrecession ends.  In the long term, mostmarkets are expected to show growing demand for electricity, however, anincreasing emphasis on efficiency may reduce future growth rates belowhistorical levels.  In addition toincreased demand, many of the markets in which TransAlta participates haveestablished renewable portfolio targets or standards that require new renewablepower investments.  As most forms ofrenewable generation also involve intermittent or uncertain levels and timingof production, higher levels of renewable generation may be accompanied by greatercapacity requirements.  The Corporationbelieves that continued and growing demand for electricity, renewable portfoliostandards, and the potential of increasing amounts of renewable generation torequire additional capacity may provide an opportunity to increase itsgeneration capacity.

 

Alberta is Canada’s fourth largest province by population withapproximately 3.7 million residents representing approximately 11 per centof Canada’s total population.  Albertaconsumed approximately 70,000 GWh of electricity in 2009.  As at December 31, 2009, the aggregateinstalled capacity of generating facilities in Alberta was approximately12,800 MW.

 

Electrical utilities in the U.S. and Canadian Pacific Northwest areorganized into the Western Electricity Coordinating Council (“**WECC**”).  The WECC isthe largest geographically of the ten regions in the North American ElectricReliability Council and is divided into four sub regions, of which Region 1includes British Columbia, Alberta, Washington, Oregon, Idaho, Montana, Utah,Western Wyoming and Northern Nevada. This sub region is referred to as the Northwest Power Pool (“**NWPP**”).  The WECCestimates that approximately 370,000 GWh of electricity was consumed in theNWPP in 2009.  The WECC also reported anestimated aggregate electrical generating capacity of approximately86,000 MW in the NWPP for the year ending 2009.

 

British Columbia is Canada’s third largest province by population withapproximately 4.5 million residents, representing approximately 13 percent of Canada’s total population.  In2007, British Columbia adopted “The BC Energy Plan” which sets to “developrealistic and achievable goals for conservation, energy efficiency and cleanenergy”.  Under the 

 

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BC Energy Plan, British Columbia will be self-sufficient by 2016 with “insurance”power to supply increased demand levels.

 

Ontario is Canada’s largest province with approximately13.1 million residents representing approximately 39 per cent of Canada’stotal population.  Ontario consumedapproximately 139,000 GWh of electricity in 2009.  Ontario Power Generation Inc., the successorto the generation business of Ontario’s former integrated electric utility,controls two thirds of Ontario’s approximately 35,465 MW of installedcapacity, the balance of which is owned by municipal electric utilities andprivate independent power producers or industrial consumers.

 

Québec is Canada’s second largest province by population withapproximately 7.8 million residents, representing approximately 23 percent of Canada’s total population.  Thegovernment in Québec has established the province’s Energy Strategy whichincludes up to 4,500 MW of additional hydroelectric capacity and4,000 MW of wind capacity installed by 2015.

 

In New Brunswick, wholesale and industrial consumers are allowed topurchase power from either New Brunswick Power or a competing supplier.  This competitive market does not extend toretail customers, businesses or small industries.  In 2007, New Brunswick announced the Charterfor Change requiring 10 per cent of electricity purchases to be fromrenewable sources commencing in 2016.

 

Australia is heavily dependent on coal for electricity, with over 80per cent of the power produced derived from coal.  Natural gas is increasingly used forelectricity, especially in South Australia and Western Australia.  The Australian Bureau of Agriculture andResource Economics (“**ABARE**”)estimated total production of 283,000 GWh for 2009 with a growth rate ofapproximately 2.8 per cent per annum from 2010 to 2015.  The major reform in the Australianelectricity industry involved the establishment in southern and easternAustralia of the National Electricity Market (“**NEM**”).  In Western Australia, where TransAlta’s powerassets are located, a new Wholesale Electricity Market (“**WEM**”)was introduced in late 2006.  Totalinstalled capacity in the WEM is about 4,500 MW, while TransAlta’scapacity in the region is approximately 300 MW.  TransAlta enjoys a solid competitiveadvantage in power supply to mining operations, especially remote miningoperations, and has built up significant knowledge and expertise in this field.

 

**Competitive Strengths**

** **

The Corporation believes it is well positioned to achieve its business strategydue to its competitive strengths, which include the following:

 

*Financialstrength*- The Corporation has investment grade ratings from Moody’s Investor Services, Inc.(“**Moody’s**”), Standard & Poor’s,a division of the McGraw Hill Companies, Inc. (“**S&P**”)and Dominion Bond Rating Service Limited (“**DBRS**”).

 

*Stablecash flow base* – Approximately 77 per cent of the Corporation’s generating capacityis contracted through PPAs, LTCs or other wholesale market transactions for thenext five years.  The net revenuereceived under these contractual arrangements helps to minimize short termrevenue fluctuations due to the variable price of electricity.

 

*Fueldiversity*- The Corporation has a diverse mix of fuels used for the generation ofelectricity, including coal, natural gas, hydro, geothermal, wind andbiomass.  The Corporation believes thatthis mix reduces the impact on corporate performance in the event of externalevents affecting one fuel source.

 

*Managementteam* -The Corporation’s management team has substantial industry, international andlocal market experience.

 

*CommercialOperations and Development expertise* - The Corporation believes that itsCommercial Operations and Development group has enhanced returns from theCorporation’s existing generation base and has allowed the Corporation toobtain more favourable pricing for uncommitted electricity, secure fuel supplyon a cost effective basis and fulfill electricity delivery obligations in theevent of an outage.

 

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*Ownershipor control of coal supply* - The Corporation owns, controls or leases extensivecoal reserves in Alberta that provide a long term and stable source of fuel forall of its thermal generation capacity in Alberta.  The Corporation’s mines in Alberta containsome of the lowest sulphur coal in North America, averaging 0.25 per centsulphur at the Whitewood mine and 0.25 per cent at the Highvale mine.  Coal with lower sulphur content emits less sulphurdioxide when it is burned.

 

*WindGeneration* - The Corporation is one of the largest owners and operators of windgeneration in Canada.  The Windmanagement team has developed key relationships with customers, suppliers andpolicy makers that provide a competitive advantage in the development,operations and marketing of wind generation.

 

*Environment* – The Corporation is arecognized leader in Sustainable Development and has taken early preventativeaction on a number of environmental fronts in advance of regulation.

 

**Capital Expenditures**

** **

Capital expenditures for property and investments (includingacquisitions) by TransAlta for the past five years were:

 
|   |   | Sustaining  Capital(1) |   | Growth  Capital(2) |           |   | Total  Expenditures |
|--------|--------|------------------------|--------|--------------------|----------------|--------|---------------------|
| 2009   |   | $380 million           |   |               | $1,290 million |   |                | $1,670 million |   |
| 2008   |   | $465 million           |   |               | $541 million   |   |                | $1,006 million |   |
| 2007   |   | $371 million           |   |               | $228 million   |   |                | $599 million |   |
| 2006   |   | $207 million           |   |               | $17 million    |   |                | $224 million |   |
| 2005   |   | $287 million           |   |               | $39 million    |   |                | $326 million |   |

 

**Notes:**

(1)                                  Sustaining capitalincludes routine and productivity expenditures, mining equipment and landpurchases, equipment modifications at Centralia, and planned maintenance.

(2)                                  Growth capitalconsists primarily of expenditures for Keephills 3, the acquisition ofCanadian Hydro, uprates and wind projects.

 

**ENVIRONMENTALRISK MANAGEMENT**

** **

TransAlta is subject to federal, provincial, state and localenvironmental laws, regulations and guidelines concerning the generation andtransmission of electrical and thermal energy and surface mining.  TransAlta is committed to complying withlegislative and regulatory requirements and to minimizing the environmentalimpact of its operations.  TransAltaworks with governments and the public to develop appropriate frameworks toprotect the environment and to promote sustainable development.

 

TransAlta’s approach to managing its environmental, health and safety (“**EHS**”) risks has three elements:

 

·                                          Compliance based activities,such as permitting and reporting;

 

·                                          ISO based EHS Managementsystems and programs, such as safety programs and auditing; and

 

·                                          Longer term strategicinitiatives, including climate change and government policy development.

 

These elements are integrated into TransAlta’s corporate wideoperations and management systems.  Theyare designed to mitigate risks of TransAlta’s activities to employees, thepublic and the environment, and to address potential competitive risks fromfuture changes in environmental policy. They are also supportive of TransAlta’s corporate commitment tosustainability and are part of our long term strategy.

 

To meet regulatory requirements and improve environmental performance,TransAlta made environmental operating and capital expenditures in fiscal year2009 of approximately $45 million. Long term environmental expenditures are generally defined asexpenditures incurred to comply with Canadian or international environmentalregulations, conventions or voluntary agreements.

 

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All TransAlta’s facilities are in material compliance with existingregulatory requirements.  Environmentalrisk at the plants operated by TransAlta has been reduced by actions in severalareas:

 

·                                          Continued investment inmercury control technology leading to expected installation of mercury captureequipment at our Alberta coal plants in 2010, and at our Centralia, Washingtoncoal plant by 2012;

 

·                                          Uprate improvements deliveringhigher efficiency generation at the Sundance plant;

 

·                                          Continued program ofcompliance and management system audits at all facilities;

 

·                                          The planned decommissioning ofthe older Wabamun thermal plant in 2010;

 

·                                          Acquisition of carbon offsets;

 

·                                          Continued expansion of the renewableenergy business, with minimal emissions footprint; and

 

·                                          Initiation of the ProjectPioneer carbon capture and storage demonstration project in Alberta.

 

TransAlta anticipates future environmental regulatory developments inareas such as climate change, air quality and water.  Regulatory changes and policy developmentsare tracked in all relevant jurisdictions. Relevant regulatory developments are discussed below.

 

**Canada**

** **

In December 2009, the Copenhagen Accord on climate change wasnegotiated and announced by participating countries.  The Accord is not binding and does notstipulate a global target for greenhouse gas (“**GHG**”)reductions.  Countries are responsiblefor determining their own targets and policies to manage emissions.  The Government of Canada had targeted a 20per cent GHG reduction by 2020.  However,the Government of Canada has not yet implemented a framework or regulations tothat effect and has consistently stated that it intends to coordinate itsclimate change policies with those of the U.S. to facilitate a continental capand trade system.  TransAlta anticipatesthat the details and schedule of the Canadian program will depend on thedevelopment and direction of the U.S. approach.

 

Separately, the Government of Canada announced its intent to developnew Canadian air pollutant requirements for sulphur dioxide, nitrogen oxide (“**NOx**”) and mercury.  No regulations have yet been developed. Work continues through a stakeholder consultation process involvingindustry, provincial and federal governments, and environmentalorganizations.  There is currently nodefined date for the finalization and implementation of any recommendations.

 

On December 1, 2009, the Government of Ontario released itsmandatory GHG reporting regulation, requiring industrial facilities over 25,000tonnes of carbon dioxide (“**CO2**”) emissionsper year to report annually.  The firstreporting is required by June 2011 for 2010 emissions.  This regulation is intended to lay thegroundwork for an Ontario-based GHG regulatory framework to be implemented in2010.

 

Alberta continues to maintain its GHG regulatory regime which requiresreductions of 12 per cent in emission intensity from a 2003-2005 averagebaseline.  The Corporation’s PPAs, forour Alberta-based coal facilities, contain change-in-law provisions that allowus to recover these compliance costs from the PPA customers.  For 2009 emissions, after flow-through, ourannual net GHG compliance costs will be approximately $4 million.  We continue to examine compliance options,including additions to our offsets portfolio to minimize our compliance riskbeyond that period.

 

We continue to make operational improvements and investments to ourexisting generating facilities to reduce the environmental impact of generatingelectricity.  TransAlta is installingmercury control equipment at its Alberta thermal operations in 2010 in order tomeet the province’s 70 per cent mercury reduction objectives.  The new Keephills 3 plant will usesupercritical combustion technology to maximize thermal efficiency, as well assulphur dioxide capture and low NOx combustion technology.

 

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On October 14, 2009, the Alberta and Canadian governments each announcedthat Project Pioneer, TransAlta’s CCS****project, hadreceived committed funding of more than $750 million.  This funding is provided as part of theGovernment of Canada’s $1 billion Clean Energy Fund and the Government ofAlberta’s $2 billion CCS initiative.  Thefunding will support the undertaking of FEED study that is expected to becompleted in 2010.  Once built, the plantwill be one of the largest CCS facilities in the world and the first to have anintegrated underground storage system. The project will pilot Alstom Canada’sproprietary chilled ammonia carbon capture technology and will be designed tocapture one megatonne of CO2 per year at our Keephills 3 facility.  The CO2 will be used for enhanced oilrecovery as well as injected into a permanent geological storage site.

 

In addition, TransAlta looks to advance other clean energy technologiesthrough organizations such as the Canadian Clean Coal Power Coalition whichexamines emerging clean combustion technologies such as gasification.  TransAlta is also part of a group of companiesparticipating in the Integrated CO2 Network to develop carbon capture andstorage systems and infrastructure for Canada.

 

**United States**

** **

In the United States, the Senate is currently considering GHGlegislation following passage in the U.S. House of Representatives of theAmerican Clean Energy and Security Act in June 2009.  The legislation is based on a cap and tradesystem which is designed to achieve a 17 per cent reduction in GHG emissions by2020.  There is significant uncertaintyregarding the form and schedule of legislation from the Senate.

 

Meanwhile, the U.S. Environmental Protection Agency (the “**EPA**”) is pursuing a separate path to regulate GHG’s underthe Clean Air Act.  In November 2009,the EPA upheld its endangerment finding which determines that CO2 is apollutant and, therefore, able to be regulated by the EPA under the Clean AirAct.  The implications of a legislativeoption versus the EPA regulatory approach is uncertain.  In September 2009, the EPA adopted amandatory GHG reporting rule for all facilities emitting more than 25,000tons per year of CO2 equivalents.  This rule becameeffective on December 29, 2009, and will require reporting to commence forsuch facilities in the U.S., including our Centralia facilities, during 2010.

 

In May 2009, in the state of Washington, the governor signed anexecutive order outlining the state government’s plan for addressing climatechange related emissions.  The executiveorder included a directive to the State Department of Ecology to work withTransAlta to apply the Washington’s GHG performance standard for powergeneration to the Centralia facilities no later than 2025.  The standard will require emissions ofapproximately 0.5 tonnes/MWh, or about half of what is currently emitted atCentralia.  Exploratory discussions areunderway with the State Department of Ecology about how this might beachieved.  At this time, it is not clearhow Washington’s target and timeframe will align with federal GHG legislationwhen it comes into effect.

 

Further, in the state of Washington, since September there hasbeen a public process to review a draft agreement between TransAlta andWashington regarding TransAlta’s voluntary initiative to reduce NOx and mercuryemissions from the Centralia facilities. Specifically, TransAlta has proposed to:

 

·                                          control NOx emissions to amaximum of 0.24 lbs/million BTU’s fuel input, and

 

·                                          reduce mercury emissions by 50per cent from current levels.

 

It is expected that Washington State will issue its final determinationin the spring of 2010.

 

Environmental issues concerning water use are managed within the ISO14001 framework.  TransAlta continues towork with regulators in each jurisdiction in which it operates, to ensure wateris used wisely on site and that all regulations pertaining to water andwetlands management, both on and off site, are met.

 

TransAlta’s environmental efforts have been recognized by the Dow JonesNorth American Sustainability Index for four years in a row.  The Index represents the best environmentalperformance leaders in North America.  In2008, TransAlta also participated in the global Carbon Disclosure Project whichrequires detailed assessments of corporate climate change plans and actions.

 

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**RISKFACTORS**

** **

Readers should consider carefully the risk factors set forth below aswell as the other information contained and incorporated by reference in thisAnnual Information Form.  For a furtherdiscussion of risk factors affecting TransAlta, please refer to “Risk Factors”in the Annual MD&A, which is incorporated by reference herein.

 

A reference herein to a material adverse effect on the Corporationmeans such an effect on the Corporation on its business, financial condition,results of operations, or its cash flows, as the context requires.

 

***Changes in the prices and availability offuel supplies required to generate electricity, and in the price ofelectricity, may materially adversely affect the Corporation.***

*** ***

A significant portion of the Corporation’s revenues are tied, eitherdirectly or indirectly, to the market price for electricity in the markets inwhich the Corporation operates.  Marketelectricity prices are impacted by a number of factors, including: the strengthof the economy, the available transmission capacity, the price of fuel that isused to generate other sources of electricity (and, accordingly, certain of thefactors that affect the price of fuel described below); the management ofgeneration and the amount of excess generating capacity relative to load in aparticular market; the cost of controlling emissions of pollution, includingpotentially the cost of carbon; the structure of the particular market; andweather conditions that impact electrical load. As a result, the Corporation cannot accurately predict futureelectricity prices and electricity price volatility could have a materialadverse effect on the Corporation.

 

The Corporation buys natural gas and some of its coal to supply thefuel needed to generate electricity.  TheCorporation could be materially adversely affected if the cost of fuel that itmust buy to generate electricity increases to a greater degree than the pricethat it can obtain for the electricity that it sells.  Several factors affect the price of fuel,many of which are beyond the Corporation’s control, including:

 

·                                          prevailing market prices forfuel, including any associated transportation costs;

 

·                                          global demand for energyproducts;

 

·                                          the cost of carbon and otherenvironmental concerns;

 

·                                          weather-related disruptionsaffecting ability to deliver fuels or near-term demand for fuels;

 

·                                          increases in the supply ofenergy products in the wholesale power markets; and

 

·                                          the extent of fueltransportation capacity or cost of fuel transportation service into theCorporation’s markets.

 

Changes in any of these factors may increase the Corporation’s cost ofproducing power or decrease the amount of revenue it receives from the sale ofpower, which could materially adversely affect the Corporation.

 

***The rules and regulations in thevarious markets in which the Corporation operates are subject to change, whichmay materially adversely affect the Corporation.***

*** ***

Certain of the markets in which the Corporation operates and intends tooperate are subject to significant regulatory oversight and control.  The Corporation is not able to predictwhether there will be any further changes in the regulatory environment,including potential regulation of the rates allowed to be charged and thecapital structure of wholesale generating companies such as the Corporation, orwhat the ultimate effect of a changing regulatory environment will have on itsbusiness.  Existing market rules andregulations may be revised or reinterpreted and new laws and regulations may beadopted or become applicable to the Corporation or its facilities which couldhave a material adverse effect on the Corporation.  The Corporation cannot guarantee that it willbe able to adapt its business in a timely manner in response to any changes inthe regulatory regimes in which it operates, and such failure to adapt couldhave a material adverse effect on the Corporation.

 

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Regulatory authorities may also from time to time investigate theCorporation’s activities in the markets in which it operates or pursuestrading.  Such investigations may resultin sanctions or penalties which may materially affect the Corporation’s futureactivities or financial status.

 

The Corporation’s facilities are also subject to various licensing andpermitting requirements in the jurisdictions in which they operate, many ofwhich licenses and permits need to be renewed from time to time.  If the Corporation is unsuccessful inrenewing such licenses or permits, or the terms of such licenses or permits arechanged in a manner that is adverse to the Corporation, the Corporation couldbe materially adversely affected.

 

Any changes in the rules and regulations of provincial or statepublic utility commissions or other regulatory bodies in the other markets inwhich the Corporation competes or may compete in the future may materiallyadversely affect the Corporation.

 

***Many of the Corporation’s activities andproperties are subject to environmental requirements and changes in, orliabilities under, these requirements may materially adversely affect the Corporation.***

*** ***

The Corporation’s operations are subject to extensive federal,provincial, state and local environmental laws, regulations and guidelines,relating to the generation and transmission of electrical and thermal energyand surface mining, pertaining to pollution and protection of the environment,health and safety and governing among other things, air emissions, water usageand discharges, storage, treatment and disposal of waste and other materialsand remediation of sites and land use responsibility (collectively, “**environmental regulation**”). These laws can impose liability for costs to investigate and remediatecontamination without regard to fault and under certain circumstances liabilitymay be joint and several resulting in one responsible party being heldresponsible for the entire obligation. Environmental regulation can also impose, among other things,restrictions, liabilities and obligations in connection with the generation,handling, use, storage, transport, treatment and disposal of hazardoussubstances and waste and can impose clean up, disclosure or otherresponsibilities with respect to spills, releases and emissions of varioussubstances to the environment. Environmental regulation can also require that facilities and otherproperties associated with the Corporation’s operations be operated,maintained, abandoned and reclaimed to the satisfaction of applicableregulatory authorities.  In addition,there is an increasing level of environmental regulation regarding the use,treatment and discharge of water and increasing anticipation of new oradditional emission regulations at a national level in Canada and the UnitedStates which may impose different compliance requirements standards on theCorporation.  These various compliancestandards may result in duplicate compliance and costs requirements for theCorporation or may impact our ability to operate our facilities.

 

To comply with environmental regulation, the Corporation must incurmaterial capital and operating expenditures relating to environmentalmonitoring, emissions and effluent control equipment and processes, emissionsmeasurement, verification and reporting, emissions fees and other complianceactivities or obligations.  The Corporationexpects to continue to have environmental expenditures in the future.  Stricter standards, new or greaterregulation, increased enforcement by regulatory authorities, more extensivepermitting requirements, an increase in the number and types of assets operatedby the Corporation subject to environmental regulation and the implementationof provincial, state and national GHG emissions, mercury emissions or other airemissions regulation in a jurisdiction in which we operate could increase theamount of these expenditures.  To theextent these expenditures cannot be passed through to our customers under ourpower purchase agreements, including Alberta PPAs or otherwise, the costs tothe Corporation could be material.  Inaddition, compliance with environmental regulation might result in restrictionson some of the Corporation’s operations. If the Corporation does not comply with environmental regulation,regulatory agencies could seek to impose statutory, administrative and/orcriminal liabilities on the Corporation or to curtail its operations andsignificant expenditures on compliance, new equipment or technology, reportingobligations and research and development. In addition to environmental regulation, the Corporation could also facecivil liability in the event that private parties seek to impose liability onthe Corporation for property damage, personal injury or other costs andlosses.  The Corporation cannot guaranteethat lawsuits or administrative or investigative actions will not be commencedagainst it and otherwise affect its operations and assets.  If an action is filed against the Corporationor which may otherwise affect its operations and assets, the Corporation couldbe required to make substantial expenditures to defend or evidence its activitiesor to bring the Corporation, its operations and assets into compliance, whichcould have a material adverse effect on the Corporation.

 

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A number of recent federal, provincial, state and local regulatoryefforts continue to focus on potential climate change or GHG emissionsregulation, and mandatory GHG reporting requirements will be effective for 2010in both Ontario and the United States. In both Canada and the U.S., GHG legislation or alternative forms ofregulation are still under development, and it is too early to determine theirimpacts.  Mandatory GHG emissionsreductions requirements are expected to impose increased costs on theCorporation, as is expected to be the case generally for thermal powerproducers in North America.  TheCorporation is subject to other air quality regulation including mercuryregulation.  At this time, theCorporation cannot assess the potential impact of future mercury regulation atits United States facilities.  To theextent new or additional GHG, mercury or other air emission regulations mayrequire the Corporation to incur costs that cannot be passed through to itscustomers under its power purchase agreements, including Alberta PPAs orotherwise, the costs could be material and have a material adverse effect onthe Corporation.

 

The Corporation’s surface mining operations are subject to laws andregulations establishing mining, environmental protection and reclamationstandards for all aspects of surface mining. As a mine owner or operator, the Corporation must obtain permits fromthe applicable regulatory body providing for the authorization of certainmining operations that result in a disturbance of the surface.  These requirements seek to limit the adverseimpacts of coal mining and more restrictive requirements may be adopted fromtime to time.  TransAlta as a mine owneror operator may also be required to submit a bond or otherwise secure paymentof certain long term obligations including mine closure or reclamationscosts.  Surety bond costs have increasedin recent years while the market terms of such bonds have generally become moreunfavourable.  In addition, the number ofcompanies willing to issue surety bonds has decreased.  TransAlta could be required to self fundthese obligations should it be unable to renew or secure the required suretybonds for its mining operations.

 

***Changes in general economic conditions mayhave a material adverse effect on the Corporation.***

*** ***

Adverse changes in general economic and market conditions could negativelyimpact product demand, revenue, operating costs, timing and extent of capitalexpenditures, the net recoverable value of plant, property and equipment,results of financing efforts, credit risk, and counterparty risk, which couldhave a material adverse effect on the Corporation.  Changes in interest rates can impact theCorporation’s borrowing costs and the capacity revenues the Corporationreceives pursuant to the Alberta PPAs.

 

Under the government mandated Alberta PPAs pursuant to which the Corporationoperates most of its thermal and hydroelectric facilities in Alberta, theCorporation is subject to certain risks, including the possibilities ofpenalties for unplanned outages and the burden of increased costs required tomaintain and operate its generation facilities.

 

The majority of the Corporation’s Alberta thermal and hydroelectricgenerating plants operate under the Alberta PPAs which established committedcapacity and electrical energy generation requirements and availability targetsto be achieved by each coal fired plant, energy and ancillary servicesobligations for the hydroelectric plants, and the price at which power will besupplied.  Under the Alberta PPAsapplicable to coal fired plants, in the event of an unplanned outage, other thanan outage determined to be caused by force majeure, the Corporation must pay apenalty for the lost production based upon a price equal to the 30 day trailingaverage of Alberta market electricity prices. Consequently, an unplanned outage could have a material adverse effecton the Corporation.

 

The Corporation bears some of the impact of increases in its operatingcosts (other than increases arising as a result of a “change of law” as suchterm is defined in the Alberta PPAs) because the price at which the Corporationis able to sell its generation under the Alberta PPAs is based on a schedule offorecast fixed costs.  Many of theforecast costs will be determined by indices, formulae or other means for theentire term of the Alberta PPA.  TheCorporation’s actual results will vary and depend on performance compared tothe forecasts on which the Alberta PPAs are based.  Operating costs could increase as a result ofa number of factors which are beyond the Corporation’s control.  A significant increase in the Corporation’soperating costs could have a material adverse effect on the Corporation.

 

From time to time during the term of the Alberta PPAs, issues may ariseregarding the intended operation of the Alberta PPAs which may require certainprovisions of the Alberta PPAs to be interpreted, and the interpretations givenmay not be favourable to the Corporation. In such circumstances, the Corporation could be materially adverselyaffected.

 

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*** ***

***The operation and maintenance of theCorporation’s facilities involves risks that may materially adversely affectthe Corporation.***

*** ***

The operation, maintenance, refurbishment, construction and expansionof power generation facilities involve risks, including breakdown or failure ofequipment or processes, fuel interruption and performance below expected levelsof output or efficiency.  Certain of theCorporation’s generation facilities, particularly in Alberta, were constructedmany years ago and may require significant capital expenditures to maintainpeak efficiency or to maintain operations at all.  In addition, weather related interference,work stoppages and other unforeseen problems may disrupt the operation andmaintenance of the Corporation’s facilities and may materially adversely affectthe Corporation.

 

The Corporation has entered into on going maintenance and serviceagreements with the manufacturers of certain critical equipment.  If a manufacturer is unable or unwilling toprovide satisfactory maintenance or warranty support, the Corporation may haveto enter into alternative arrangements with other providers if it cannotperform the maintenance itself.  Thesearrangements could be more expensive to the Corporation than its currentarrangements and this increased expense could have a material adverse effect onthe Corporation.  If the Corporation isunable to enter into satisfactory alternative arrangements, the inability ofthe Corporation to access technical expertise or parts could have a materialadverse effect on the Corporation.

 

While the Corporation maintains an inventory, or otherwise makesarrangements to obtain, spare parts to replace critical equipment and maintainsinsurance for property damage to protect against operating risks, theseprotections may not be adequate to cover lost revenues or increased expensesand penalties which could result if the Corporation is unable to operate itsgeneration facilities at a level necessary to comply with sales contracts(including Alberta PPAs).

 

The Corporation may be subject to the risk that it is necessary tooperate a plant at a capacity level beyond that which the Corporation hascontracted to provide steam in order to fulfill a contract.  In such circumstances the costs to producethe steam being sold may exceed the revenues derived therefrom.

 

***The Corporation relies on transmissionlines that it does not own or control, which may hinder its ability to deliverelectricity.***

*** ***

The Corporation depends on transmission and distribution facilitiesthat are owned and operated by utilities and other power companies to deliverthe electricity the Corporation generates. An extended disruption in transmission would impact the Corporation’sability to sell and deliver electricity, which could have a material adverse effecton the Corporation.

 

***Variations in weather can affect demand forelectricity and the Corporation’s ability to generate electricity.***

*** ***

By the nature of the Corporation’s business, the Corporation’s earningsare sensitive to weather variations from period to period.  Variations in winter weather affect thedemand for electrical heating requirements. Variations in summer weather affect the demand for electrical coolingrequirements.  These variations in demandtranslate into spot market price volatility. Variations in precipitation also affect water supplies, which in turnaffect the Corporation’s hydroelectric assets.

 

***The Corporation may be adversely affectedif its supply of water is materially reduced.***

*** ***

Hydroelectric, natural gas, biomass and coal fired plants requirecontinuous water flow for their operation. Shifts in weather or climate patterns, seasonable precipitation, thetiming and rate of melting, run off, and other factors beyond the control ofthe Corporation, may reduce the water flow to the Corporation’sfacilities.  Any material reduction inthe water flow to the Corporation’s facilities would limit the Corporation’sability to produce and market electricity from these facilities and could havea material adverse effect on the Corporation. There is an increasing level of regulation respecting the use, treatmentand discharge of water, and respecting the licensing of water rights injurisdictions where the Corporation operates. Any such change in regulations could have a material adverse effect onthe Corporation.

 

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***Dam failures may result in lost generatingcapacity, increased maintenance and repair costs and other liabilities.***

*** ***

The occurrence of dam failures at any of our hydroelectric facilitiescould result in a loss of generating capacity, and repairing such failurescould require us to incur significant expenditures of capital and otherresources.  If such failures occur, wecould be exposed to significant liability for damages.  There can be no assurance that our dam safetyprogram will be able to detect potential dam failures prior to occurrence oreliminate all adverse consequences in the event of failure.  Other safety regulations could change fromtime to time, potentially impacting our costs and operations.  Upgrading all dams to enable them towithstand more severe events could require us to incur significant expendituresof capital and other resources.  Theconsequences of dam failures could have a material adverse effect on theCorporation.  We attempt to manage thisrisk by following preventative maintenance procedures and obtaining insurancecoverage, however, in the event of a sufficiently large dam failure, insurancecoverage may not be adequate and we may suffer a material adverse effect.

 

***Variation in wind levels may negativelyimpact the amount of electricity generated at the Corporation’s windfacilities.***

*** ***

Wind is naturally variable. Therefore, the level of electricity production from our wind facilitieswill also be variable.  In addition, thestrength and consistency of the wind resource at our wind facilities may varyfrom what we anticipate due to a number of factors including: the extent towhich our site-specific historic wind data and wind forecasts accuratelyreflects actual long-term wind speeds, strength and consistency; the potentialimpact of climatic factors; the accuracy of our assumptions relating to, amongother things, weather, icing and soiling of wind turbines, site access, wake andline losses and wind shear; the potential impact of topographical variations;and the potential for electricity losses to occur before delivery.

 

A reduced amount of wind at the location of one or more of our windfacilities over an extended period may reduce the production from suchfacilities, as well as any environmental attributes that accrue to the Corporationand reduce our revenues and profitability.

 

***Disruption in fuel supply from forestproducts industry could negatively impact our biomass facility.***

*** ***

GPEC has its full electrical capacity committed to long term contracts,which requires consistent wood waste deliveries for fuel.  These fuel deliveries are in part supplieddirectly from the on-site customer, with the balance delivered by truck fromother customer owned facilities.  Loss ofthe on-site supply of wood waste may result in increased fuel expense in orderto continue to meet all electrical supply obligations.

 

***The Corporation could be adversely affectedby natural disasters or other catastrophic events.***

*** ***

The Corporation’s generation facilities and its operations are exposedto potential damage and partial or complete loss, resulting from environmentaldisasters (e.g. floods, high winds, fires, and earthquakes), equipment failuresand other events beyond our control.  Theoccurrence of a significant event which disrupts the ability of the generationfacilities to produce or sell power for an extended period, including eventswhich preclude existing customers from purchasing electricity, could have amaterial adverse effect on the Corporation. The Corporation’s generation facilities could be exposed to effects ofsevere weather conditions, natural disasters and potentially catastrophicevents such as a major accident or incident at the Corporation’s sites or at agenerating facility owned by a third party to which the Corporation’stransmission assets are connected.  Incertain cases, there is the potential that some events may not excuse theCorporation from performing its obligations pursuant to agreements with thirdparties.  The fact that several of theCorporation’s generation facilities are located in remote areas may make accessfor repair of damage difficult.

 

***Equipment failure may have a materialadverse effect on the Corporation.***

*** ***

There is a risk of equipment failure due to wear and tear, latentdefect, design error or operator error, among other things, which couldmaterially adversely affect the Corporation. Although the Corporation’s generation facilities have generally operatedin accordance with expectations, there can be no assurance that they willcontinue to do so.  In addition, therecan be no assurance that any applicable insurance coverage would be adequate toprotect the Corporation from material adverse effects.

 

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*** ***

***Trading risks may have a material adverseeffect on the Corporation.***

*** ***

The Corporation’s trading and marketing business frequently involvesthe establishment of trading positions in the wholesale energy markets on botha medium term and short term basis.  Tothe extent that the Corporation has long positions in the energy markets, adownturn in the markets is likely to result in losses from a decline in thevalue of such long positions. Conversely, to the extent that the Corporation enters into forward salescontracts to deliver energy the Corporation does not own, or take shortpositions in the energy markets, an upturn in the energy markets is likely toexpose the Corporation to losses as it attempts to cover any short positions byacquiring energy in a rising market.

 

In addition, from time to time, the Corporation may have a tradingstrategy consisting of simultaneously holding a long position and a shortposition, from which the Corporation expects to earn a profit based on changesin the relative value of the two positions. If, however, the relative value of the two positions changes in adirection or manner the Corporation did not anticipate, it could realize lossesfrom such a paired position.

 

If the strategy the Corporation uses to hedge its exposures to thesevarious risks is not effective, it could incur significant losses.  The Corporation’s trading positions aresubject to the level of volatility in the energy markets that, in turn, dependon various factors, including weather in various geographical areas and shortterm supply and demand imbalances, which cannot be predicted with anycertainty.  A shift in the energy marketscould adversely affect the Corporation’s positions which could also have amaterial adverse effect on the Corporation.

 

While the Corporation uses a number of risk management controlsconducted by the Corporation’s independent Risk Management Group to limit itsexposure to risks arising from its trading activities, including value at risk,stop loss restrictions, stress testing, volumetric and term limits andrestrictions on authorized instruments, the Corporation cannot guarantee thatlosses will not occur and such losses, if material, could have a materialadverse effect on the Corporation.

 

***The Corporation operates a highlycompetitive environment and may not be able to compete successfully.***

*** ***

We operate in a number of Canadian provinces, as well as in the UnitedStates and Australia.  These areas ofoperation are affected by competition ranging from large utilities to small independentpower producers, as well as private equity and internationalconglomerates.  Some competitors havesignificantly greater financial and other resources than we do.  Competitive harm could have a materialadverse effect on the Corporation.

 

***Because of the Corporation’s multinationaloperations, the Corporation is subject to currency rate risk and regulatory andpolitical risk.***

*** ***

A significant part of the Corporation’s revenues and expenditures arein U.S. and other currencies. Fluctuations in the exchange rate between these currencies and theCanadian dollar could have a negative effect on the Corporation.  While the Corporation attempts to manage thisrisk through its use of hedging instruments, including cross currency swaps,forward exchange contracts and by matching revenues and expenses by currency atthe Corporate level, there can be no assurance that these risk managementefforts will be effective and fluctuations in these exchange rates may have amaterial adverse effect on the Corporation.

 

In addition to currency rate risk, the Corporation’s foreign operationsmay be subject to regulatory and political risk.  Any change to the regulations governing powergeneration or the political climate in countries where the Corporation hasoperations could impose additional costs and have a material adverse effect onthe Corporation.

 

***The Corporation may have difficulty raisingneeded capital in the future, which could significantly harm its business.***

*** ***

To the extent that the Corporation’s sources of cash and cash flow fromoperations are insufficient to fund the Corporation’s activities, it may needto raise additional funds.  Additionalfinancing may not be available when needed and, if such financing is available,it may not be available on terms favourable to the Corporation.

 

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*** ***

***The***Corporation’s debt securities will bestructurally subordinated to any debt of its subsidiaries that is currentlyoutstanding or may be incurred in the future.

*** ***

The Corporation operates its business through, and a majority of itsassets are held by, its subsidiaries, including partnerships.  The Corporation’s results of operations andability to service indebtedness are dependent upon the results of operations ofits subsidiaries and the payment of funds by these subsidiaries to it in theform of loans, dividends or otherwise. The Corporation’s subsidiaries will not have an obligation to payamounts due pursuant to any debt securities issued by the Corporation or makeany funds available for payment of debt securities issued by the Corporation,whether by dividends, interests, loans, advances or other payments.  In addition, the payment of dividends and themaking of loans, advances and other payments to the Corporation by itssubsidiaries may be subject to statutory or contractual restrictions.

 

In the event of the liquidation of any subsidiary, the assets of thesubsidiary would be used first to repay the indebtedness of the subsidiary,including trade payables or obligations under any guarantees, prior to beingused to pay the Corporation’s indebtedness, including any debt securitiesissued by the Corporation.  Suchindebtedness and any other future indebtedness of such subsidiaries would bestructurally senior to any debt securities issued by the Corporation.

 

The Corporation’s subsidiaries have financed some investments using nonrecourse project financing.  Each nonrecourse project loan is structured to be repaid out of cash flow provided bythe investment.  In the event of adefault under a financing agreement which is not cured, the lenders wouldgenerally have rights to the related assets. In the event of foreclosure after a default, the Corporation’ssubsidiary may lose its equity in the asset or may not be entitled to any cashthat the asset may generate.  Although adefault under a project loan will not cause a default with respect to any debtsecurities issued by the Corporation, it may materially affect the Corporation’sability to service its outstanding indebtedness.

 

***Certain of the contracts to which theCorporation is a party require the Corporation to provide collateral againstits obligations.***

*** ***

The Corporation is exposed to risk under certain electricity andnatural gas purchase and sale contracts entered into for the purposes of hedgesand proprietary trading.  The terms andconditions of these contracts require the Corporation to provide collateralwhen the fair value of these contracts is in excess of any credit limitsgranted by the Corporation’s counterparties and the contract obliges theCorporation to provide the collateral. The change in fair value of these contracts occurs due to changes incommodity prices.  These contractsinclude: (i) purchase agreements, when forward commodity prices are lessthan contracted prices; and (ii) sales agreements, when forward commodityprices exceed contracted prices. Downgrades in the Corporation’s creditworthiness by certain creditrating agencies may decrease the credit limits granted by the Corporation’s counterpartiesand accordingly increase the amount of collateral the Corporation may have toprovide, which could have a material adverse effect on the Corporation.

 

***If counterparties to the Corporation’scontracts are unable to meet their obligations, the Corporation may bematerially adversely affected.***

*** ***

If purchasers of the Corporation’s electricity, steam or othercontractual counterparties of the Corporation default on their obligations, theCorporation may be materially adversely affected.  While the Corporation seeks to control itsexposure to credit risk by considering the ability of counterparties to fulfilltheir obligations under the related contracts prior to entering into suchcontracts, the Corporation cannot guarantee that it will be successful inidentifying credit worthy customers. Moreover, while the Corporation seeks to monitor trading activities toensure that the credit limits for counterparties are not exceeded, it cannotguarantee that it will be successful in doing so.  If counterparties to the Corporation’scontracts are unable to meet their obligations, the Corporation could suffer areduction in revenue which could have a material adverse effect on theCorporation.

 

***Insurance coverage may not be sufficient.***

*** ***

The Corporation has insurance for its facilities, including all riskproperty insurance, commercial general liability insurance, boiler andmachinery coverage, replacement power and business interruption insurance, inamounts and with deductibles that the Corporation considers appropriate.  The Corporation’s insurance coverage may notbe available in 

 

- 33 - 

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the future on commercially reasonable terms or adequate insurancelimits may not be available in the market. In addition, the insurance proceeds received for any loss or damage toany of its generation facilities may not be sufficient to permit it to continueto make payments on its debt.

 

***Provision for income taxes may not besufficient.***

*** ***

The Corporation’s operations are complex, and the computation of theprovision for income taxes involves tax interpretations, regulations, andlegislation that are continually changing. In addition, the Corporation’s tax filings are subject to audit bytaxation authorities.  While the Corporationbelieves that its tax filings have been made in material compliance with allapplicable tax interpretations, regulations, and legislation, the Corporationcannot guarantee that it will not have disagreements with taxation authoritieswith respect to the Corporation’s tax filings that could have a materialadverse effect on the Corporation.

 

***The Corporation may be unsuccessful in thedefence of legal actions.***

*** ***

The Corporation is occasionally named as a defendant in various claimsand legal actions and as a party in commercial disputes which are resolved byarbitration.  There can be no assurancethat the Corporation will be successful in the defence of each of these claimsand legal actions or that any claim or legal action that is decided adverse tothe Corporation will not materially adversely affect the Corporation.

 

***If the Corporation fails to attract andretain key personnel, it could be materially adversely affected.***

*** ***

The loss of any of the Corporation’s key personnel or its inability toattract, train, retain and motivate additional qualified management and otherpersonnel could have a material adverse effect on the Corporation.  Competition for these personnel is intenseand there can be no assurance that the Corporation will be successful in this regard.

 

If the Corporation is unable to successfully negotiate new collectivebargaining agreements with its unionized workforce, as required from time totime, it will be adversely affected.

 

While the Corporation believes it has a satisfactory relationship withits unionized employees, the Corporation cannot guarantee that it will be ableto successfully negotiate or renegotiate its collective bargaining agreementson terms agreeable to the Corporation. The Corporation expects to re-negotiate six collective bargainingagreements, involving 404 of its employees, in 2010 and an additional threecollective bargaining agreements, involving 540 of its employees, in 2011.  Any problems in negotiating these collectivebargaining agreements could lead to higher employee costs and a work stoppage orstrike, which could have a material adverse effect on the Corporation.

 

***Risks relating to TransAlta’s developmentprojects and acquisitions may materially adversely affect the Corporation***

*** ***

TransAlta continues to focus on expanding its business throughdevelopment projects and acquisitions. The development and construction of the Corporation’s projects aresubject to execution and capital cost risks, including, but not limited to,risks relating to regulatory approvals, third party opposition, costescalations, construction delays, shortages of raw materials or skilled labourand capital constraints.  Such risks mayhave a material adverse impact on TransAlta’s business, financial condition,results of operations and cash flows.

 

Expansion of TransAlta’s business through development projects andacquisitions may place increased demands on our management, operating systems,internal controls and financial and physical resources.  In addition, the process of integrating acquiredbusinesses or development projects may involve unforeseen difficulties.  Failure to successfully manage or integrateany acquired businesses or development projects could have a material adverseimpact on TransAlta’s business, financial condition, results of operations andcash flows.  Further, TransAlta cannotmake assurances that it will be successful in integrating any acquisition orthat the commercial opportunities or operational synergies of any acquisitionwill be realized as expected.

 

With respect to acquisitions, TransAlta cannot make assurances that itwill identify suitable transactions or that it will have access to sufficientresources, through its credit facilities, the capital markets or otherwise, topursue and complete any identified acquisition opportunities on a timely basisand at a reasonable cost.  Anyacquisition the Corporation 

 

- 34 - 

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proposes or completes would be subject to normal commercial risks thatthe transaction may not be completed on the terms negotiated, on time, or atall.  An unavoidable level of riskremains regarding potential undisclosed or unknown liabilities relating to anyacquisition, including the acquisition of Canadian Hydro.  The existence of such undisclosed liabilitiesmay have a material adverse impact on the Corporation’s business, financialcondition, results of operations and cash flows.

 

**EMPLOYEES**

** **

As of December 31, 2009, the Corporation had 2,228 full and parttime employees, of which 1,295 were employed in TransAlta’s generation businessand 59 were employed in TransAlta’s energy marketing business.  Approximately 46 per cent of the Corporation’semployees are represented by labour unions. The Corporation is currently a party to 11 different collectivebargaining agreements.  Overall in 2009,the Corporation renewed five of the agreements; an additional six agreementsare expected to be re-negotiated in 2010.

 

**CAPITALSTRUCTURE**

** **

**General**

** **

The Corporation’s authorized share capital consists of an unlimitednumber of common shares and an unlimited number of first preferred shares,issuable in series.  As at February 22,2010, there were 218,597,610 common shares outstanding and no first preferredshares were outstanding.

 

**Common Shares**

** **

Each common share of the Corporation entitles the holder thereof to onevote for each common share held at all meetings of shareholders of theCorporation, except meetings at which only holders of another specified classor series of shares are entitled to vote, to receive dividends if, as and whendeclared by the Board of Directors, subject to prior satisfaction ofpreferential dividends applicable to any first preferred shares, and toparticipate rateably in any distribution of the assets of the Corporation upona liquidation, dissolution or winding up and subject to prior rights andprivileges attaching to first preferred shares. The common shares are not convertible and are not entitled to any pre-emptiverights.  The common shares are notentitled to cumulative voting.

 

**First Preferred Shares**

** **

The Corporation is authorized to issue an unlimited number of firstpreferred shares, issuable in series and, with respect to each series, theBoard is authorized to fix the number of shares comprising the series anddetermine the designation, rights, privileges, restrictions and conditionsattaching to such shares, subject to certain limitations.

 

The first preferred shares of all series rank senior to all othershares of the Corporation with respect to priority in payment of dividends andwith respect to distribution of assets in the event of liquidation, dissolutionor winding up of the Corporation, or a reduction of stated capital.  Holders of first preferred shares areentitled to receive cumulative quarterly dividends on the subscription pricethereof as and when declared by the Board at the rate established by the Boardat the time of issue of shares of a series. No dividends may be declared or paid on any other shares of the Corporationunless all cumulative dividends accrued upon all outstanding first preferredshares have been paid or declared and set apart.  In the event of the liquidation, dissolutionor winding up of the Corporation, or a reduction of stated capital, no sumshall be paid or assets distributed to holders of other shares of theCorporation until the holders of first preferred shares shall have been paidthe subscription price of the shares, plus a sum equal to the premium payableon a redemption, plus a sum equal to the arrears of dividends accumulated onthe first preferred shares to the date of such liquidation, dissolution,winding up, or reduction of stated capital, as applicable.  After payment of such amount, the holders offirst preferred shares shall not be entitled to share further in the distributionof the assets of the Corporation.

 

The Board may include, in the share conditions attaching to aparticular series of first preferred shares, certain voting rights effectiveupon the Corporation failing to make payment of six quarterly dividend payments,whether or not consecutive.  These votingrights continue for so long as any dividends remain in arrears.  These voting rights are the 

 

- 35 - 

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right to one vote for each $25 of subscription price on all matters inrespect of which shareholders vote, and additionally, the right of all seriesof first preferred shares, voting as a combined class, to elect two directorsof the Corporation if the Board then consists of less than 16 directors, orthree directors if the Board consists of 16 or more directors.  Otherwise, except as required by law, theholders of first preferred shares shall not be entitled to vote or to receivenotice of or attend any meeting of the shareholders of the Corporation.

 

Subject to the share conditions attaching to any particular seriesproviding to the contrary, the Corporation may redeem first preferred shares ofa series, in whole or from time to time in part, at the redemption priceapplicable to each series and the Corporation has the right to acquire any ofthe first preferred shares of one or more series by purchase for cancellationin the open market or by invitation for tenders at a price not to exceed theredemption price applicable to the series.

 

**CREDITRATINGS**

** **

**Issuer Rating**

** **

As of December 31, 2009, the Corporation’s corporate credit ratingfrom S&P was BBB (stable), its senior unsecured debt rating from Moody’swas Baa2 (stable), and its issuer rating from DBRS was BBB (stable).

 

**Senior Unsecured Long Term Debt**

** **

As of December 31, 2009, the Corporation’s senior unsecured longterm debt is rated BBB (stable) by DBRS, BBB (stable) by S&P and Baa2(stable) by Moody’s.  The ratings fordebt instruments range from a high of AAA to a low of D in the case of bothDBRS and S&P and from a high of Aaa to a low of C in the case of Moody’s.

 

According to the DBRS rating system, debt securities rated BBB are ofadequate credit quality.  Protection ofinterest and principal is considered acceptable, but the entity is moresusceptible to adverse changes in financial and economic conditions, or theremay be other adverse conditions present which reduce the strength of the entityand its rated securities.  “High” or “Low”grades indicate the relative standing within a rating category.  DBRS also assigns rating trends to each ofits ratings to give investors an understanding of DBRS’ opinion regarding theoutlook for the rating in question.

 

According to the S&P rating system, debt securities rated BBBexhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are morelikely to lead to a weakened capacity of the obligor to meet its financialcommitment on such obligations than on obligations in the higher ratingcategories.  The ratings from AA to B maybe modified by the addition of a plus (+) or minus (–) sign to show relativestanding within the major rating categories.

 

According to the Moody’s rating system, debt securities rated Baa aresubject to moderate credit risk.  Theyare considered medium grade and as such may possess certain speculativecharacteristics.  Numerical modifiers 1,2 and 3 are applied to each rating category, with 1 indicating that theobligation ranks in the higher end of the category, 2 indicating a mid rangeranking and 3 indicating a ranking in the lower end of the category.

 

**Note Regarding Credit Ratings**

** **

Credit ratings are intended to provide investors with an independentmeasure of credit quality of an issue of securities.  The credit ratings accorded to the Corporation’soutstanding securities by S&P, Moody’s and DBRS, as applicable, are notrecommendations to purchase, hold or sell such securities inasmuch as suchratings do not comment as to market price or suitability for a particularinvestor.  There is no assurance that theratings will remain in effect for any given period or that a rating will not berevised or withdrawn entirely by S&P, Moody’s or DBRS in the future if, inits judgement, circumstances so warrant.

 

- 36 - 

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** **

**DIVIDENDS**

** **

In setting dividends, the Board considers the Corporation’s financialperformance and balances liquidity requirements, capital reinvestment andreturning capital to shareholders, with a policy of paying annual dividends toits shareholders in the range of 60 to 70 per cent of comparable earnings.  The payment and level of future dividends onthe common shares are determined by the Board upon consideration of suchfactors.  TransAlta has declared and paidthe following dividends per share on its outstanding common shares for the pastthree years:

 
| **Period** | ** ** | ** **      | ** ** | **Dividend  per Common  Share** |
|------------|------------|-----------------|------------|---------------------------------|
|       |       |            |       |                            |
| 2007       |       | First  Quarter  |       | $0.25                           |
|       |       | Second  Quarter |       | $0.25                           |
|       |       | Third  Quarter  |       | $0.25                           |
|       |       | Fourth  Quarter |       | $0.25                           |
|       |       |            |       |                            |
| 2008       |       | First  Quarter  |       | $0.27                           |
|       |       | Second  Quarter |       | $0.27                           |
|       |       | Third  Quarter  |       | $0.27                           |
|       |       | Fourth  Quarter |       | $0.27                           |
|       |       |            |       |                            |
| 2009       |       | First  Quarter  |       | $0.29                           |
|       |       | Second  Quarter |       | $0.29                           |
|       |       | Third  Quarter  |       | $0.29                           |
|       |       | Fourth  Quarter |       | $0.29                           |

 

On January 29, 2010, the Corporation’s Board of Directors declareda cash dividend of $0.29 per common share, payable on April 1, 2010to shareholders of record on March 1, 2010.

 

**MARKETFOR SECURITIES**

** **

TransAlta’s common shares are listed on the TSX under the symbol “TA”and the New York Stock Exchange under the symbol “TAC”.  The following table sets forth the reportedhigh and low trading prices and trading volumes of the Corporation’s commonshares as reported by the TSX for the periods indicated:

 
| ** **             | ** ** | **Price  ($)** | ** ** | ** ** |
|------------------------|------------|----------------|------------|------------|
| **M****onth**          | ** ** | **High**       | ** ** | **Low**    | ** ** | **Volume** |
|                   |       |           |       |       |   |   |
| 2009                   |       |           |       |       |   |   |
| January                |       | 26.60          |       | 21.13      |   | 10,881,392 |
| February               |       | 22.96          |       | 18.50      |   | 16,191,905 |
| March                  |       | 21.05          |       | 17.96      |   | 23,251,069 |
| April                  |       | 21.29          |       | 18.14      |   | 18,614,529 |
| May                    |       | 21.57          |       | 19.81      |   | 17,675,250 |
| June                   |       | 23.93          |       | 19.80      |   | 23,782,366 |
| July                   |       | 22.40          |       | 20.56      |   | 13,891,386 |
| August                 |       | 22.91          |       | 20.86      |   | 17,313,964 |
| September              |       | 22.22          |       | 20.61      |   | 13,392,244 |
| October                |       | 22.05          |       | 20.10      |   | 12,836,564 |
| November               |       | 22.23          |       | 20.04      |   | 19,249,898 |
| December               |       | 23.65          |       | 21.51      |   | 15,714,132 |
|                   |       |           |       |       |   |   |
| **2010**               |       |           |       |       |   |   |
| January                |       | 23.98          |       | 22.06      |   | 12,926,828 |
| February 1  to 22 |       | 24.00          |       | 21.62      |   | 7,670,115 |

 

**PRIORSALES**

** **

In the 12 months prior to the date hereof, the following securities ofthe Corporation have been issued:

 

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** **

**Common Shares**

** **

The following table summarizes the issuances of Common Shares withinthe twelve month period prior to the date of this short form prospectus.

 
| **Date(s) of  Issuance** | ** ** | **Number  of Common Shares  or Securities** | ** ** | **Issue  Price per Security** | ** ** | **Description  of Transaction** |
|-------------------------------|------------|---------------------------------------------|------------|-------------------------------|------------|---------------------------------|
| ** **                    | ** ** | ** **                                  | ** ** | ** **                    | ** ** | ** **                      |
| November 5,  2009(1)     |       | 20,522,000  Common Shares                   |       | $20.10                        |       | Public  Offering                |

 

**Note:**

(1)                                  Common Shares were issued pursuantto the Corporation’s public offering of Common Shares pursuant to a prospectussupplement dated October 29, 2009. See “General Development of theBusiness —Year Ended December 31, 2009”.

 

**DIRECTORSAND OFFICERS**

** **

The name, province or state and country of residence of each of thedirectors and officers of TransAlta as at February 21, 2010, theirrespective position and office and their respective principal occupation duringthe five preceding years, are set out below. The year in which each director was appointed to serve to the Board isalso set out below.  Each director isappointed to serve until the next annual meeting of TransAlta or until his orher successor is elected or appointed.

 
| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-------------------------------------------------------------|------------|---------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **William D. Anderson**  Ontario, Canada                    |       | 2003                            | *** *** | ***Corporate  Director.*** Mr. Anderson was President of BCE Ventures (a  subsidiary of BCE Inc.) from 2001 to 2005 (telecommunications) and prior to  that, Chief Financial Officer (“**CFO**”) of BCE  Inc., Bell Canada Inc. and Bell Cablemedia plc (telecommunications). As  President of BCE Ventures, he was responsible for a number of significant  operating companies as well as being Chief Executive Officer (“**CEO**”) of Bell Canada International Inc. In his CFO roles,  Mr. Anderson was responsible for all financial operations of the  respective companies and executed numerous debt and equity financings,  corporate acquisition and disposition transactions as well as corporate and  operational restructurings. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         | Mr. Anderson  is a director of Gildan Activewear Inc. and Chair of the Board of MDS Inc. He  is a past director at BCE Emergis Inc., Bell Cablemedia plc, Bell Canada  International Inc., CGI Group Inc., Four Seasons Hotels Inc., Sears Canada  Inc. and Videotron Holdings plc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         | At  TransAlta, Mr. Anderson is Chair of the Audit and Risk Committee of the  Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         | Mr. Anderson  holds a bachelor in business administration from the University of Western  Ontario (London, ON) and is a Chartered Accountant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

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| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-------------------------------------------------------------|------------|---------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Stephen L. Baum**  New Hampshire, U.S.A.                  |       | 2008                            | *** *** | ***Corporate  Director.*** Mr. Baum was Chairman and CEO of Sempra Energy  from December 1996 to February 2006, a San Diego-based Fortune 500  energy services holding company formerly known as Enova Corporation. Previous  to that, Mr. Baum was President, CEO and Vice-Chairman of Sempra Energy.  Prior to that he was Chairman, CEO and a member of the board of directors of  Enova Corporation, the parent company of San Diego Gas & Electric (**“SDG&E”**) where he served in various officer positions  including General Counsel. Before joining SDG&E, he was Senior Vice-President  and General Counsel of the New York Power Authority. He has also held various  legal positions, including General Attorney at Orange & Rockland  Utilities, and as an associate with the law firm of Curtis, Mallet-Prevost,  Colt & Mosle in New York City.                                                                                                                                    |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                        |       |                            |         | Mr. Baum  is a member of the board of directors of Computer Sciences Corporation and is  a member of its Audit Committee and Governance Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                        |       |                            |         | At  TransAlta, Mr. Baum is a member of the Audit and Risk Committee and  Human Resources Committee of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                        |       |                            |         | Mr. Baum  is a graduate of Harvard University and the University of Virginia Law  School. He has also served as a Captain in the U.S. Marine Corps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Stanley J. Bright**(2)   Maryland, U.S.A.            |       | 1999                            | *** *** | ***Corporate  Director.*** Mr. Bright was Chairman, President and CEO of  MidAmerican Energy Company (“**MidAmerican**”)  from 1997 to 1999 (electric and gas utility). He was also Chairman,  President, and CEO of predecessor companies, including the Iowa Illinois  Gas & Electric Company (“**IIG&E**”)  from 1991 to 1997. As the CEO of IIG&E, Mr. Bright was successful  with the consolidation of IIG&E and other Iowa based utilities in  anticipation of emerging market competition, giving rise to the creation of  MidAmerican. As the Chairman, President and CEO of the new entity,  Mr. Bright led the realization of significant merger related synergies  while working through the post-merger transition. The company also structured  a long-term rate plan with the Iowa Public Service Commission. He retired as  CEO of MidAmerican in 1999 but continued as a director until 2006.

 

At TransAlta,  Mr. Bright is a member of the Human Resources Committee of the Board. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                        |       |                            |         | Mr. Bright  holds an undergraduate degree in accounting from The George Washington  University (Washington, D.C.) and is a Certified Public Accountant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

 

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| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-------------------------------------------------------------|------------|---------------------------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Timothy W. Faithfull**  England, U.K.                     |       | 2003                            | *** *** | ***Corporate  Director.*** Mr. Faithfull is a 36-year veteran of Royal  Dutch/Shell plc (energy), where he held diverse international roles  principally in oil products and LNG project development. As President and CEO  of Shell Canada Limited, he was responsible for bringing the $6 billion  Athabasca Oil Sands Project on line, the first fully integrated oil sands  venture in 25 years. Mr. Faithfull has extensive experience with  commodity exposure and risk management, the result of his time directing the  global crude oil trading operations of Shell International Trading and  Shipping Company from 1993 to 1996. He was Chairman and CEO of Shell Eastern  Petroleum in Singapore from 1996 to 1999, including Shell’s main refinery and  oil products trading for Asia Pacific.                                                       |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         | During his  time in Singapore he was a director of DBS Bank, and the Port of Singapore  Authority. He was a trustee of the main Singapore Arts/Theatre complex. In  Calgary, he served on the board of the Calgary Health Trust and the Epcor  Arts Centre.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         | Mr. Faithfull  is a director of Canadian Pacific Railway Limited, Shell Pension Trust  Limited and AMEC plc. He is a past director of Enerflex Systems Income Fund.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         | At  TransAlta, Mr. Faithfull is Chair of the Human Resources Committee of  the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         | Mr. Faithfull  holds a master of arts in philosophy, politics and economics from the  University of Oxford, U.K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Ambassador Gordon D. Giffin**  Georgia, U.S.A.            |       | 2002                            | *** *** | ***Lawyer  and Senior Partner, McKenna, Long & Aldridge LLP****(law  firm).*  From 1997 to 2001, Mr. Giffin served as the United States Ambassador to  Canada with responsibility for managing Canada/U.S. bilateral relations,  including energy and environmental policy. Prior to this appointment, he  practised law for 18 years as a senior partner in Atlanta, Georgia and  Washington, D.C. His practice focused on energy regulatory work at the state  and federal levels. Prior to that, he served as Chief Counsel and Legislative  Director to United States Senator Sam Nunn, with responsibility for the legal  and legislative operations of the office. In 2001, Mr. Giffin returned  to private practice where he specialized in state and federal regulatory  matters, including those related to trade, energy and trans-border commerce. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         | Mr. Giffin  is a director of Canadian Imperial Bank of Commerce, Canadian National  Railway Company, Canadian Natural Resources Limited, and Just Energy Income  Fund.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                        |       |                            |         | At  TransAlta, Mr. Giffin is Chair of the Governance and Environment  Committee of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-------------------------------------------------------------|------------|---------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         | Mr. Giffin  holds a bachelor of arts from Duke University (Durham, NC) and a juris  doctorate from Emory University School of Law (Atlanta, GA).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **C. Kent Jespersen**  Alberta, Canada                      |       | 2004                            | *** *** | ***Corporate  Director.***Mr. Jespersen has been Chair and CEO of La  Jolla Resources International Ltd. since 1998 (advisory and investments). He  has also held senior executive positions with NOVA Corporation of Alberta,  Foothills Pipe Lines Ltd., and Husky Oil Limited before assuming the  presidency of Foothills Pipe Lines Ltd. and later, NOVA Gas International  Ltd. (“**NOVA**”). At NOVA, he led the  non-regulated energy services business (including energy trading and  marketing) and all international activities.                                                                                                                                                                                                                                                                                                                                                      |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         | Mr. Jespersen  is Chairman and a director of Orvana Minerals Ltd., CCR Technologies Ltd. and  Orion Oil & Gas Ltd. and a director of Matrikon Inc., Axia NetMedia  Corporation and CanElson Drilling Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         | At  TransAlta, Mr. Jespersen is a member of the Governance and Environment  Committee of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         | Mr. Jespersen  holds a bachelor of science in education and a master of science in education  from the University of Oregon (Eugene, OR).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Michael M. Kanovsky**  Alberta, Canada                    |       | 2004                            | *** *** | ***Corporate  Director and Independent Businessman.*** Mr. Kanovsky co-founded Northstar  Energy Corporation (“**Northstar**”)  with initial capital of $400,000 and helped build this entity into an oil and  gas producer that was sold to Devon Energy Corporation for approximately  $600 million in 1998. During this period, Mr. Kanovsky was  responsible for strategy and finance as well as merger and acquisition  activity. He initiated Northstar’s entry into electrical cogeneration through  its wholly-owned power subsidiary, Powerlink Corporation (“**Powerlink**”). Powerlink developed one of the first  independent power producer (IPP) gas-fired co-generation plants in Ontario  and also internationally. In 1997, he founded Bonavista Energy Trust, which  has grown to a present day market capitalization of approximately $3.4  billion. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         | Mr. Kanovsky  is a director of Argosy Energy Corporation, ARC Energy Trust, Bonavista  Energy Trust, Devon Energy Corporation, and Pure Technologies Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         | At  TransAlta, Mr. Kanovsky is a member of the Audit and Risk Committee of  the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

 

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| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-------------------------------------------------------------|------------|---------------------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                        |       |                            |         | Mr. Kanovsky,  a Professional Engineer, holds a bachelor of science in mechanical  engineering from Queen’s University (Kingston, ON) as well as a master of  business administration from the Richard Ivey School of Business at the  University of Western Ontario (London, ON).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Donna Soble Kaufman**

Ontario,  Canada                   |       | 1989                            | *** *** | ***Lawyer  and Corporate Director.*** Mrs. Kaufman is a former partner with Stikeman  Elliott LLP, an international law firm, where she practised antitrust law  (law firm). She has served on a number of boards since 1987, when she became  a director of Selkirk Communications Limited, a diversified communications  company. A year later she was appointed Chair of the Board, President and  CEO. She has also served on the boards of Southam Inc., Provigo Inc., Bell  Canada International Inc., Bell Globemedia Inc., the Public Sector Pension  Investment Board, the Hudson’s Bay Company and UPM-Kymmene Corporation. She  also currently serves on the boards of BCE Inc. and Bell Canada. She is also  a director of The Historica-Dominion Institute, a private-sector education  initiative to promote knowledge of Canadian history and heritage, the  Institute of Corporate Directors, and a member of the Canadian Advisory Board  of Catalyst, a non-profit organization working to advance women in business.  In 2001, she was named a Fellow of the Institute of Corporate Directors and  in 2009 she was appointed a member of the Prime Minister’s Advisory Committee  on the Public Service of Canada. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                        |       |                            |         | At  TransAlta, Mrs. Kaufman is Chair of the Board and an ex officio member  of all committees of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                        |       |                            |         | Mrs. Kaufman  holds a bachelor of civil law from McGill University (Montréal, QC) and a  master of laws from the Université de Montréal (Montréal, QC).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Gordon S. Lackenbauer**(3)  Alberta, Canada               |       | 2005                            | *** *** | ***Corporate  Director.*** Mr. Lackenbauer was Deputy Chairman of BMO  Nesbitt Burns Inc. (investment banking) from 1990 to 2004. Prior to this, he  was responsible for the principal activities of the firm, which included  fixed income sales and trading, new issue underwriting, syndication and  merger and acquisition advisory mandates. Mr. Lackenbauer has worked  with many of Canada’s leading utilities and has frequently acted as an expert  financial witness testifying on the cost of capital, appropriate capital  structure, and the fair rate of return, principally before the Alberta  Utilities Commission, the National Energy Board, and the Ontario Energy  Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                        |       |                            |         | Mr. Lackenbauer  is a director of NAL Oil & Gas Trust and Chair of its Audit  Committee and a member of both the Corporate Governance and Reserves  Committees. He is also a director of CTV Globemedia Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

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| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-------------------------------------------------------------|------------|---------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                        |       |                            |         | At  TransAlta, Mr. Lackenbauer is a member of the Governance and Environment  Committee and the Audit and Risk Committee of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                        |       |                            |         | Mr. Lackenbauer  holds a bachelor of arts in economics from Loyola College (Montréal, QC), as  well as a master of business administration from the University of Western  Ontario (London, ON). He is also a chartered financial analyst.                                                                                                                                                                                                                                                                                                                                                                              |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **Dr. Martha C. Piper**  British Columbia, Canada           |       | 2006                            | *** *** | ***Corporate  Director.*** Dr. Piper was President and Vice-Chancellor of  the University of British Columbia (“**UBC**”) from  1997 to 2006 (education). Prior to her appointment at UBC, she served as  Vice-President, Research at the University of Alberta. She served on the  boards of the Alberta Research Council, the Conference Board of Canada and  the Centre of Frontier Engineering Research. Dr. Piper was also  appointed by the Prime Minister of Canada to the Advisory Council on Science  and Technology and served as Chair of the Board of the National Institute for  Nanotechnology. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                        |       |                            |         | Dr. Piper  is a director of the Bank of Montreal, Shoppers Drug Mart Corporation and a  member of the Canadian delegation to the Trilateral Commission, an  organization fostering closer cooperation among the core democratic  industrialized areas of the world.                                                                                                                                                                                                                                                                                                                                                          |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                        |       |                            |         | At  TransAlta, Dr. Piper is a member of the Human Resources Committee and  the Governance and Environment Committee of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                        |       |                            |         | Dr. Piper  holds a bachelor of science in physical therapy from the University of  Michigan (Ann Arbor, MI), a master of arts in child development from the  University of Connecticut (Storrs, CT), and a doctorate of philosophy in  epidemiology and biostatistics from McGill University (Montréal, QC). She has  also received honorary degrees from 18 international universities.  Dr. Piper is an Officer of the Order of Canada and a recipient of the  Order of British Columbia.                                                                                                                        |

 

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| **Name, Province (State) and  Country of Residence****(1)** | ** ** | **Year first became  Director** | ** **   | **Principal Occupation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-------------------------------------------------------------|------------|---------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **Stephen G. Snyder**  Alberta, Canada                      |       | 1996                            | *** *** | ***President  and Chief Executive Officer of TransAlta Corporation since 1996.*** Previously Mr. Snyder  was President & CEO, Noma Industries Ltd., President & CEO,  GE Canada Inc., and President & CEO, Camco, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         | Mr. Snyder  is a director of Intact Financial Corporation and director of the Calgary  Stampede Foundation Campaign. He is an immediate past Director of the  Canadian Imperial Bank of Commerce, past Chair of the Calgary Stampede  Foundation, and past Chair of the Alberta Secretariat for Action on  Homelessness. Mr. Snyder is the past Chair of the Calgary Committee to  End Homelessness, the Canada-Alberta ecoEnergy Carbon Capture &  Storage Task Force, the Conference Board of Canada, the Calgary Zoological  Society, the Canadian Electrical Association, the United Way Campaign of  Calgary and Area, and the Calgary Zoo’s “Destination Africa” capital  campaign. |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         | Mr. Snyder  holds a bachelor of science in chemical engineering from Queen’s University  (Kingston, ON) as well as a master of business administration from the  University of Western Ontario (London, ON).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                        |       |                            |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                        |       |                            |         | He has  honourary degrees from the University of Calgary (LLD), and the Southern  Alberta Institute of Technology (Bachelor of Applied Technology). He was  awarded the Alberta Centennial Medal in 2005, and the Conference Board  Honorary Associate Award for 2008 and in 2009 the Chamber of Commerce  Sherrold Moore Award of Excellence.                                                                                                                                                                                                                                                                                                                                                                              |

 

**Notes:**

(1)                                  The following nominee directors areCanadian residents:  William D. Anderson,C. Kent Jespersen, Michael M. Kanovsky, Donna Soble Kaufman, Gordon S.Lackenbauer, Martha C. Piper and Stephen G. Snyder.

(2)                                  Mr. Bright served as adirector of Access Air Inc. (“**Access Ai**r”)for the period of December 4, 1997 to January 31, 2000, a privatelyheld start up airline company.  Thecompany Mr. Bright was employed by, and whom he represented on the AccessAir board, supported Access Air in the hope that it would improve air serviceto the state of Iowa.  Access Air filedfor bankruptcy protection on November 29, 1999.

(3)                                  Mr. Lackenbauer resigned fromthe Board of Directors of Tembec Inc. (“**Tembec**”) on August 2,2007.  On December 19, 2007, Tembecannounced its proposed recapitalization transaction providing a consensualsolution to both noteholders and shareholders. On February 22, 2008, Tembec announced that it had received theapproval of the majority of shareholders and the requisite majority ofnoteholders of Tembec Industries Inc.  OnFebruary 27, 2008, Tembec announced that it had received approval from theOntario Superior Court of Justice (Commercial List) with respect to their planof arrangement relating to the proposed recapitalization transaction.  On October 31, 2008, Tembec announcedthat it had successfully obtained a final American court order recognizing itsCanadian plan of arrangement as a foreign proceeding in the United States.

 

**Officers**

 
| **Name**               | ** ** | **Principal  Occupation**               | ** ** | **Residence**    |
|------------------------|------------|-----------------------------------------|------------|------------------|
|                   |       |                                    |       |             |
| Stephen  G. Snyder     |       | President  and Chief Executive Officer  |       | Alberta,  Canada |
| Dawn  L. Farrell       |       | Chief  Operating Officer                |       | Alberta,  Canada |
| Brian  Burden          |       | Chief  Financial Officer                |       | Alberta,  Canada |
| Kenneth  S. Stickland  |       | Chief  Legal Officer                    |       | Alberta,  Canada |
| Michael  Williams      |       | Chief  Administration Officer           |       | Alberta,  Canada |
| William  D. A. Bridge  |       | Chief  Technology Officer               |       | Alberta,  Canada |
| W.  Frank Hawkins      |       | Vice-President  and Treasurer           |       | Alberta,  Canada |
| Hume  D. Kyle          |       | Vice-President,  Finance and Controller |       | Alberta,  Canada |
| Maryse  C. St.-Laurent |       | Vice-President  and Corporate Secretary |       | Alberta,  Canada |

 

- 44 -

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All of the officers of TransAlta have held their present principaloccupation or position for the past five years, except for the following:

 

·                                         Prior to April 2009, DawnFarrell was Executive Vice-President, Commercial Operations and Development ofthe Corporation. Prior to July 2007, she was Executive Vice-PresidentEngineering, Aboriginal Relations and Generation at BC Hydro and prior to June2006 she was Executive Vice-President Generation.

 

·                                         Prior to April 2009, BrianBurden was Executive Vice-President and Chief Financial Officer of the Corporation.Prior to December 2005, he was Executive Vice-President and Chief Financial Officerof Molson Inc.  Prior to 2002, he wasSenior Vice-President, Seagram Corporate/Venture Transition of Diageo PLC.

 

·                                          Prior to April 2009, KennethStickland  was Executive Vice-President,Legal, SD and EH&S of the Corporation. Prior to April, 2007, he wasExecutive Vice-President, Legal.

 

·                                          Prior to April 2009, MichaelWilliams was Executive Vice-President, Human Resources, IT and Communicationsof the Corporation. Prior to July 2007, he was Executive Vice-President,HR & Communications.

 

·                                       Prior to April 2009, WilliamBridge was Executive Vice-President, Generation Technology and PMM of theCorporation. Prior to July 2007, he was Vice-President, Western CanadaOperations.  Prior to October 2005, Mr. Bridgewas Vice-President, Customer and Asset Management; prior to September 2003,he was Vice-President, Development & Acquisition; and prior to September 2001he was Director, Commercial Operations and Development, Eastern Canada.

 

·                                          Prior to April 2009, FrankHawkins was Vice-President and Treasurer of the Corporation. Prior to June 2007,he was Assistant Treasurer.

 

·                                         Prior to February 2009, HumeKyle was Vice-President, Finance and Chief Financial Officer of Fort ChicagoEnergy Management Ltd.

 

·                                         Prior to April 2009, MaryseSt.-Laurent was Corporate Secretary of the Corporation. Prior to June 2005,she was Secretary of TC PipeLines, LP since September 2003 and RecordingSecretary since January 2001, and Senior Legal Counsel TransCanadaCorporation since June 1997.

 

As of February 23, 2010, the directors and executive officers ofTransAlta, as a group, beneficially owned, directly or indirectly, or exercisedcontrol or direction over an aggregate of 722,564 common shares of TransAlta.  This constitutes less than one per cent ofTransAlta’s outstanding common shares.

 

**INTERESTSOF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**

** **

No director or executive officer of the Corporation, no person orcompany that is the direct or indirect beneficial owner of, or who exercisescontrol or direction over more than 10 per cent of the common shares of theCorporation, and no associate or affiliate of any of them, has or has had anymaterial interest, direct or indirect, in any transaction involving theCorporation within the three most recently completed financial years or to datein 2010 or in any proposed transactions that has materially affected or willmaterially affect the Corporation.

 

**INDEBTEDNESSOF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS**

** **

Since January 1, 2009, there has been no indebtedness outstandingto TransAlta from any of TransAlta’s directors, nominees for election asdirectors, executive officers, senior officers or associates of any suchdirectors, nominees or officers.

 

- 45 -

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** **

**CORPORATECEASE TRADE ORDERS, BANKRUPTCIES OR SANCTIONS**

** **

**Corporate Cease Trade Orders**

** **

Except as otherwise disclosed herein, no director, executive officer orcontrolling security holder of TransAlta Corporation is, as at the date of thisAnnual Information Form, or has been, within the past 10 years before the datehereof, a director or executive officer of any other issuer that, while thatperson was acting in that capacity:

 

(i)            was the subject of a ceasetrade or similar order or an order that denied the relevant company access toany exemption under securities legislation for a period of more than 30consecutive days; or

 

(ii)           was subject to an event thatresulted, after the person ceased to be a director or executive officer, in thecompany being the subject of a cease trade or similar order or an order thatdenied the relevant company access to any exemption under securitieslegislation for a period of more than 30 consecutive days; or

 

(iii)          within a year of that personceasing to act in that capacity, became bankrupt, made a proposal under anylegislation relating to bankruptcy or insolvency or was subject to orinstituted any proceedings, arrangement or compromise with creditors or had areceiver, receiver manager or trustee appointed to hold its assets.

 

**Personal Bankruptcies**

** **

No director, executive officer or controlling security holder ofTransAlta Corporation has, within the 10 years before the date hereof, becomebankrupt, made a proposal under any legislation relating to bankruptcy orinsolvency, or became subject to or instituted any proceedings, arrangement orcompromise with creditors, or had a receiver, receiver manager or trusteeappointed to hold such person’s assets.

 

**Penalties or Sanctions**

** **

No director, executive officer or controlling security holder ofTransAlta Corporation has:

 

(i)            been subject to any penaltiesor sanctions imposed by a court relating to securities legislation or by asecurities regulatory authority or has entered into a settlement agreement witha securities regulatory authority, other than penalties for late filing ofinsider reports; or

 

(ii)           been subject to any otherpenalties or sanctions imposed by a court or regulatory body that would likelybe considered important to a reasonable investor in making an investmentdecision.

 

**CONFLICTSOF INTEREST**

** **

Circumstances may arise where members of the Board serve as directorsor officers of corporations which are in competition to the interests of theCorporation.  No assurances can be giventhat opportunities identified by such member of the Board will be provided tothe Corporation.

 

**LEGALPROCEEDINGS AND REGULATORY ACTIONS**

** **

TransAlta is occasionally named as a party in various claims and legalproceedings which arise during the normal course of its business.  TransAlta reviews each of these claims,including the nature of the claim, the amount in dispute or claimed and theavailability of insurance coverage. Although there can be no assurance that any particular claim will beresolved in the Corporation’s favour, the Corporation does not believe that theoutcome of any claims or potential claims of which it is currently aware willhave a material adverse effect on the Corporation, taken as a whole, aftertaking into account amounts reserved by the Corporation.  For further information, please refer toNotes 26 and 28 of the 

 

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Corporation’s audited consolidated financial statements for the yearended December 31, 2009 which financial statements are incorporated by referenceherein.  See “Documents Incorporated byReference” herein.

 

**TRANSFERAGENT AND REGISTRAR**

** **

The transfer agent and registrar for TransAlta’s common shares is CIBCMellon Trust Company in Vancouver, Calgary, Winnipeg, Toronto andMontréal.  The transfer agent andregistrar for the common shares in the United States is Mellon InvestorServices LLC at its principal office in New York, New York.

 

**INTERESTSOF EXPERTS**

** **

Ernst & Young LLP, Chartered Accountants, 1000, 440 – 2nd Avenue, S.W., Calgary, Alberta, T2P 5E9are the auditors of the Corporation.

 

TransAlta’s auditors, Ernst & Young LLP, are independent inaccordance with the Rules of Professional Conduct of the Institute ofChartered Accountants of Alberta and have complied with the SEC’s rules onauditor independence.

 

**ADDITIONALINFORMATION**

** **

Additional information in relation to TransAlta may be found underTransAlta’s profile on SEDAR at www.sedar.com.

 

Additional information including directors’ and officers’ remunerationand indebtedness, principal holders of TransAlta’s securities and securitiesauthorized for issuance under equity compensation plans (all where applicable),is contained in TransAlta’s Management Proxy Circular for its most recentannual meeting of shareholders that involved the election of directors and canbe obtained upon request from the Vice-President and Corporate Secretary ofTransAlta Corporation.

 

Additional financial information is provided in TransAlta’s auditedconsolidated financial statements as at and for the year ended December 31,2009 and in the Annual MD&A, each of which is incorporated by reference inthis Annual Information Form.  See “DocumentsIncorporated by Reference” herein.

 

**AUDITAND RISK COMMITTEE**

** **

**General**

** **

The members of TransAlta’s Audit and Risk Committee (“**ARC**”) satisfy the requirements for independence under theprovisions of Canadian Securities Regulators, MultilateralInstrument 52 110 Audit Committees, Section 303A of the New YorkStock Exchange Rules and Rule 10A 3 under the U.S. Securitiesand Exchange Act of 1934.  The ARC’sCharter requires that it be comprised of a minimum of three independentdirectors.  It currently has fiveindependent members, William D. Anderson (Chair), Stephen L. Baum, Michael M.Kanovsky, Gordon S. Lackenbauer and Donna S. Kaufman as an ex officiomember.  All members of the committee arefinancially literate pursuant to both Canadian and U.S. securities requirementsand each of Mr. William D. Anderson and Mr. Gordon S. Lackenbauerhave been determined by the Board to be an “*audit committee financialexpert*”, within the meaning of Section 407 of the United StatesSarbanes Oxley Act of 2002 (“**Sarbanes Oxley Act**”).

 

**Mandate of the Audit and Risk Committee**

** **

The mandate of the ARC is to assist the Board in its oversight responsibilityto the shareholders of the Corporation, the investment community and othersrelating to the integrity of the Corporation’s financial statements, thequality of its financial reporting processes, the systems of internalaccounting and financial controls, the risk identification assessmentsconducted by management and the programs established in response to such risks,the internal audit function, the external auditors’ qualifications,independence, performance and reports and to provide oversight with respect tolegal compliance programs established by management which may have a materialeffect on the financial statements of the Corporation.  The ARC also reviews the Corporation’scompliance with the Corporation’s code of conduct, financial code of conductand the Corporation’s policy with respect to the hiring of employees of theexternal auditors.

 

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The ARC’s function is oversight. Management is responsible for the preparation, presentation andintegrity of the financial statements of the Corporation.  Management and the internal audit group ofthe Corporation are responsible for maintaining appropriate accounting andfinancial reporting principles and policy and internal controls and proceduresfor compliance with accounting standards and applicable laws and regulations.

 

While the ARC has the responsibilities and powers set forth herein, itis not the duty of the ARC to plan or conduct audits or to determine that theCorporation’s financial statements are complete and accurate and in accordancewith generally accepted accounting principles. This is the responsibility of management and the external auditors.

 

Management is responsible for preparing the interim and annualfinancial statements and financial disclosure of the Corporation and formaintaining a system of internal controls to provide reasonable assurance thatassets are safeguarded and that transactions are authorized, executed, recordedand reported properly.  The ARC’s role isto provide direct, meaningful and effective oversight of the Corporation’sfinancial reporting and counsel to management without assuming responsibilityfor management’s day to day duties.

 

**Audit and Risk Committee Charter**

** **

The Charter of the Audit and Risk Committee is attached as Appendix “A”.

 

**Relevant Education and Experience of Audit and RiskCommittee Members**

** **

The following is a brief summary of the education or experience of eachmember of the ARC that is relevant to the performance of their responsibilitiesas a member of the ARC, including any education or experience that has providedthe member with an understanding of the accounting principles used by TransAltato prepare its annual and interim financial statements.

 
| **Name of ARC Member** | ** ** | **Relevant Education and Experience**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **W. D. Anderson**     |       | Mr. Anderson  is a Chartered Accountant.   Mr. Anderson has served as CEO of a public company and as CFO of  several public companies.  In such  capacities, Mr. Anderson actively supervised persons engaged in  preparing, auditing, analyzing or evaluating financial statements.  Mr. Anderson has also served as a  principal financial officer and accounting officer and as a director and  audit committee chair and member of several public companies.                                                                                                                          |
| ** **             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Stephen L. Baum**    |       | Mr. Baum  has over 25 years of financial, legal and industry experience gained working  as a senior officer, director and Chairman of energy companies.  During his tenure as CEO of Sempra Energy,  Mr. Baum had financial officers reporting directly to him.  Mr. Baum also serves as Chairman of  the Audit Committee of Computer Sciences Corporation, a NYSE listed  company.  Mr. Baum holds a law  degree from the University of Virginia.                                                                                                                                        |
| ** **             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **M. M. Kanovsky**     |       | Mr. Kanovsky  has over 30 years of financial and industry experience gained through working  in the investment banking business as well as a director, officer and audit  committee member of several public companies and trusts.  Mr. Kanovsky is a graduate of the MBA  program from the Richard Ivey School of Business at the University of Western  Ontario.                                                                                                                                                                                                                                            |
| ** **             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **G. S. Lackenbauer**  |       | Mr. Lackenbauer  has over 35 years of experience in the investment banking industry.  Mr. Lackenbauer has also appeared as  an expert financial witness with respect to financial markets, capital  structure, cost of capital and fair return on common equity, in over 40  regulatory proceedings.   Mr. Lackenbauer also has extensive experience as a director or  governor of public companies and not for profit organizations.  Mr. Lackenbauer holds a Bachelor of  Arts in Economics, a MBA degree from the University of Western Ontario and is  a Chartered Financial Analyst. |

 

- 48 -

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| **Name of ARC Member**         | ** ** | **Relevant Education and Experience**                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |       |                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **D. S. Kaufman (ex officio)** |       | Mrs. Kaufman  has over 25 years of legal, professional and financial management experience  gained in the practice of law, as a director of several public companies and  as Chair, President and CEO of Selkirk Communications.  Mrs. Kaufman has served on several  audit committees.  Mrs. Kaufman  holds a civil law degree from McGill University and a master of laws from the  University of Montreal. |

 

**Other Board Committees**

** **

In addition to the Audit and Risk Committee, TransAlta has two otherstanding committees: the Governance and Environment Committee and the HumanResources Committee.  Mrs. Kaufman,the Chair of the Board, is a non-voting ex officio member of all committees.The members of these committees as of December 31, 2009 are:

 
| **Governance and Environment Committee**      | ** ** | **Human Resources Committee**         |
|-----------------------------------------------|------------|---------------------------------------|
|                                          |       |                                  |
| **Chair:  Ambassador Gordon D.  Giffin** | ** ** | **Chair:  Timothy W. Faithfull** |
| C.  Kent Jespersen                            |       | Stephen  L. Baum                      |
| Gordon  S. Lackenbauer                        |       | Stanley  J. Bright                    |
| Dr. Martha  C. Piper                     |       | Dr. Martha  C. Piper             |
| Donna Soble Kaufman (ex officio)              |       | Donna Soble Kaufman (ex officio)      |

 

The Charters of the Governance and Environment Committee and the HumanResources Committee may be found on TransAlta’s website under CorporateResponsibility Governance at www.transalta.com. Further information about the Board and the Corporation’s corporategovernance may also be found on our website or in the Corporation’s ManagementProxy Circular which is filed on Sedar at www.sedar.com .

 

**Fees Paid to Ernst & Young LLP**

** **

For the years ended December 31, 2009 and December 31, 2008,Ernst & Young LLP and its affiliates were paid $3,562,032 and$3,372,142, respectively, as detailed below:

 

**Ernst &Young LLP**

 
| Year  Ended Dec. 31 | ** ** | **2009**   | ** **          | **2008**   |
|--------------------------|------------|------------|---------------------|------------|
| ** **               | ** ** | ** ** | ** **          | ** ** |
| Audit  Fees              |       | $          |  2,679,080     |       |   | $ |  2,594,183 |   |
| Audit  related fees      |       | 824,631    |                |       | 432,343 |   |
| Tax  fees                |       | 58,321     |                |       | 345,616 |   |
|                     |       |       |                |       |   |   |
| **Total**                | ** ** | **$**      | ** 3,562,032** | ** ** | ** ** | **$** | ** 3,372,142** | ** ** |

 

No other audit firms provided audit services in 2009 or 2008.

 

The nature of each category of fees is described below:

 

*AuditFees*

* *

Audit fees were paid for professional services rendered by the auditorsfor the audit of the Corporation’s annual financial statements or servicesprovided in connection with statutory and regulatory filings or engagements,including the translation from English to French of the Corporation’s financialstatements and other documents.  Totalaudit fees for 2009 include payments related to 2008 in the amount of$1,212,080.  Total audit fees for 2008include payments related to 2007 in the amount of $1,403,923.

 

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* *

*AuditRelated Fees*

* *

The audit-related fees in 2009 were primarily for work performed byErnst & Young LLP in relation to the implementation of InternationalFinancial Reporting Standards, public equity and debt offerings andmiscellaneous accounting advice provided to the Corporation.

 

*TaxFees*

* *

The majority of tax fees for 2009 relate to various tax related mattersin our foreign operations.

 

**Pre-Approval Policies and Procedures**

** **

The ARC has considered whether the provision of services other than auditservices is compatible with maintaining the auditors’ independence.  In May 2002, the ARC adopted a policy(the “**Policy**”) that prohibits TransAlta fromengaging the auditors for “prohibited” categories of non-audit services andrequires pre-approval of the ARC for other permissible categories of non-auditservices, such categories being determined under the Sarbanes-Oxley Act.  The Policy also provides that the Chair ofthe ARC may approve permissible non-audit services during the quarter andreport such approval to the ARC at its next regularly scheduled meeting.  In addition, this year, the ARC grantedmanagement the authority to approve *de minimus*permissible non-audit services (which are in the aggregate the lesser of 5 percent of the total fees paid to the external auditors or $125,000) provided suchservices are reported to the ARC at its next scheduled meeting.

 

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# ** **

# **APPENDIX “A” – AUDIT AND RISK COMMITTEE CHARTER**

# ** **

**A.**                                    Establishment of Committee andProcedures

** **

1.                                       Composition of Committee

 

The Audit and Risk Committee (the “Committee”) of theBoard of Directors (the “Board”) of TransAlta Corporation (the “Corporation”)shall consist of not less than three Directors. All members of the Committee shall be determined by the Board to beindependent as required under the provisions of Canadian Securities Regulators’Multilateral Instrument 52-110 Audit Committees, Section 303A of the NewYork Stock Exchange rules and Rule 10A-3 of the U.S. Securities andExchange Act of 1934, as such rules apply to audit committee members.  All members of the Committee must befinancially literate pursuant to both Canadian and U.S. securities requirementsand at least one member must be determined by the Board to be an “auditcommittee financial expert” within the meaning of Section 407 of theUnited States Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act’).  Determinations as to whether a particulardirector satisfies the requirements for membership on the Committee shall bemade by the Board of Directors (the “Board”) at the recommendation of theCommittee.

 

2.                                       Appointment of CommitteeMembers

 

Members of the Committee shall be appointed from timeto time by the Board, on the recommendation of the Governance and EnvironmentCommittee, and shall hold office until the next annual meeting of shareholders,or until their successors are earlier appointed, or until they cease to beDirectors of the Corporation.

 

3.                                       Vacancies

 

Where a vacancy occurs at any time in the membershipof the Committee, it may be filled by the Board.  The Board shall fill any vacancy if themembership of the Committee is less than three directors.

 

4.                                       Committee Chair

 

The Board shall appoint a Chair for the Committee onthe recommendation of the Governance and Environment Committee.

 

5.                                       Absence of Committee Chair

 

If the Chair of the Committee is not present at anymeeting of the Committee, one of the members of the Committee who is present atthe meeting shall be chosen by the Committee to preside at the meeting.

 

6.                                       Secretary of Committee

 

The Committee shall appoint a Secretary who need notbe a director of the Corporation.

 

7.                                       Meetings

 

The Chair of the Committee or any of its members maycall a meeting of the Committee.  TheCommittee shall meet at least quarterly and at such other time during each yearas it deems appropriate.  In addition, theChair of the Committee or any of its members may call a special meeting of theCommittee at any time. Although the Corporation’s Chief Executive Officer mayattend meetings of the Committee, the Committee shall also meet in separateexecutive sessions.

 

A-1

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8.                                       Quorum

 

A majority of the members of the Committee present inperson or by telephone or other telecommunication device that permits allpersons participating in the meeting to speak to each other, shall constitute aquorum.

 

9.                                       Notice of Meetings

 

Notice of the time and place of every meeting shall begiven in writing (including by way of written facsimile communication or email)to each member of the Committee at least 48 hours prior to the time fixed forsuch meeting, provided, however, that a member may in any manner waive noticeof a meeting; and attendance of a member at a meeting constitutes a waiver ofnotice of the meeting, except where a member attends for the express purpose ofobjecting to the transaction of any business on the ground that the meeting isnot lawfully called.  Notice of everymeeting shall also be provided to the external and internal auditors.

 

10.                                 Attendance at Meetings

 

At the invitation of the Chair of the Committee, otherBoard members, officers or employees of the Corporation, the external auditors,and other experts or consultants may attend a meeting of the Committee.

 

11.                                 Procedure, Records andReporting

 

Subject to any statute or the articles and by-laws ofthe Corporation, the Committee shall fix its own procedures at meetings, keeprecords of its proceedings and report to the Board generally not later than thenext scheduled meeting of the Board.

 

12.                                 Review of Charter

 

The Committee shall evaluate its performance andreview and reassess the adequacy of its Charter at least annually or otherwise,as it deems appropriate, and if necessary propose changes to the Governance andEnvironment Committee and the Board for review and approval.

 

13.                                 Outside Experts and Advisors

 

The Committee Chair, on behalf of the Committee, orany of its members is authorized, at the expense of the Corporation, whendeemed necessary or desirable, to retain independent counsel, outside expertsand other advisors to advise the Committee independently on any matter.

 

**B.**                                    Mandate of the Committee

** **

The Committee provides assistance to the Board in fulfilling itsoversight responsibilities to shareholders, the investment community andothers, relating to the integrity of the Corporation’s financial statements,the financial reporting process, the systems of internal financial controls,the risk identification assessment conducted by management and the programsestablished by management in response to such assessment, the internal auditfunction and the external auditors’ qualifications, independence andperformance.  In so doing, it is theCommittee’s responsibility to maintain an open avenue of communication betweenthe Committee, the external auditors, the internal auditors and the managementof the Corporation.

 

The function of the Committee is oversight.  Management is responsible for thepreparation, presentation and integrity of the interim and annual financialstatements and related disclosure documents. Management of the Corporation is also responsible for maintainingappropriate accounting and financial reporting policies and systems of internalcontrols and procedures that are in compliance with accounting standards,applicable laws and regulations and that provide reasonable assurances thatassets are safeguarded and that transactions are authorized, executed, recordedand reported properly.

 

A-2

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While the Committee has the responsibilities and powers set forthherein, it is not the duty of the Committee to plan or conduct audits or todetermine that the Corporation’s financial statements are complete and accurateand in accordance with generally accepted accounting principles.  This is the responsibility of management andthe external auditors.  The designationof a member or members as an “audit committee financial expert” is based onthat individual’s education and experience, which the individual will bring tobear in carrying out his or her duties on the Committee.  Designation as an “audit committee financialexpert” does not impose on such person any duties, obligations and liabilitythat are greater than the duties, obligations and liability imposed on a memberof the Committee and Board in the absence of such designation.

 

Management is also responsible for the identification and management ofthe Corporation’s risks and the development and implementation of policies andprocedures to mitigate such risks.  TheCommittee’s role is to provide oversight in order to ensure that theCorporation’s assets are protected and safeguarded within reasonable businesslimits.

 

**C.**                                    Duties and Responsibilities ofthe Committee

** **

The Committee shall have the following specific duties andresponsibilities:

 

1.                                       Audit and Financial Matters

 

The Committee shall:

 

(a)                                  have direct responsibility for thecompensation and oversight of the external auditors including nominating theexternal auditors to the Board for appointment by the shareholders at theCorporation’s general annual meeting.  Inperforming its function, the Committee shall:

 
| (i)    | review the  experience and qualifications of the external auditors’ senior personnel who  are providing audit services to the Corporation and the quality control  procedures of the external auditors, including obtaining confirmation that  the external auditors are in compliance with Canadian and U.S. regulatory  registration requirements;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (ii)   | review and  approve annually the external auditors audit plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (iii)  | review and  approve the basis and amount of the external auditors’ fees and ensure the  Corporation has provided appropriate funding for payment of compensation to  the external auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (iv)   | review and  discuss with the external auditors all relationships that the external  auditors and their affiliates have with the Corporation and its affiliates in  order to determine the external auditors’ independence, including, without  limitation, (i) requesting, receiving and reviewing, at least annually,  a formal written statement from the external auditors delineating all  relationships that may reasonably be thought to bear on the independence of the  external auditors with respect to the Corporation, (ii) discussing with  the external auditors any disclosed relationships or services that the  external auditors believe may affect the objectivity and independence of the  external auditors, and (iii) recommending that the Board take  appropriate action in response to the external auditors’ report to satisfy  itself of the external auditors’ independence; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (v)    | resolve  disagreements between management and the external auditors regarding  financial reporting;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (vi)   | subject to the delegation granted to the Chair of  the Committee, pre-approve all audit related services including all  non-prohibited non-audit services provided by                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

A-3

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|   | the external  auditors; the Chair of the Committee, is authorized to approve all audit  related services including non-prohibited non-audit services provided by the  external auditors, and shall report all such approvals to the Committee at  its next scheduled meeting; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                          |
| (vii)  | inform the external  auditors and management that the external auditors shall have direct access  to the Committee at all times, as well as the Committee to the external  auditors; and                                                                                      |
|   |                                                                                                                                                                                                                                                                          |
| (viii) | instruct the external auditors that they are ultimately accountable  to the Committee as representatives of the shareholders of the Corporation;                                                                                                                              |

 

(b)                                 review with management and the Corporation’sexternal auditors the Corporation’s financial reporting in connection with theannual audit and the preparation of the financial statements, including,without limitation, the annual audit plan of the external auditors, thejudgment of the external auditors as to the quality, not just theacceptability, of and the appropriateness of the Corporation’s accountingprinciples as applied in its financial reporting and the degree ofaggressiveness or conservatism of the Corporation’s accounting principles andunderlying estimates;

 

(c)                                  review with management and the externalauditors all financial statements and financial disclosure;

 
| (i)    | recommend to  the Board for approval the Corporation’s audited annual financial statements  including the notes thereto; the “Management’s Discussion and Analysis” and  any required reconciliation;                                                                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                         |
| (ii)   | review any  report or opinion to be rendered in connection therewith;                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                         |
| (iii)  | review with  the external auditors the cooperation they received during the course of  their review and their access to all records, data and information requested;                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                         |
| (iv)   | discuss with  management and the external auditors all significant transactions which are  not a regular part of the Corporation’s business;                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                         |
| (v)    | review the  management processes for formulating sensitive accounting estimates and the  reasonableness of the estimates;                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                         |
| (vi)   | review with  management and the external auditors any changes in accounting principles and  their applicability to the business;                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                         |
| (vii)  | review with  management and the external auditors alternative treatments of financial  information within generally accepted accounting principles that have been discussed  with management, ramifications of the use of such alternative disclosures and  treatments and the treatment preferred by the external auditors; |
|   |                                                                                                                                                                                                                                                                                                                         |
| (viii) | satisfy itself that there are no unresolved issues between management  and the external auditors that could reasonably be expected to materially  affect the financial statements;                                                                                                                                           |

 
| (d) | review with management and the external auditors the  Corporation’s interim financial statements, including the notes thereto,  “Management’s Discussion and Analysis”, US GAAP Note, the related earnings  release, and approve the release of all to the public; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

A-4

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| (e)    | review and  discuss with management and the external auditors the use of “pro forma” or  “adjusted” non-GAAP information and the applicable reconciliation;                                                                                                                                                                                                                                                                                                                                                       |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (f)    | on behalf of  the Committee, the Chair shall review all public disclosure of material  financial information extracted or derived from the Corporation’s financial  statements prior to dissemination to the public;                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (g)    | review with  management at least annually the approach and nature of financial information  and earnings guidance to be disclosed to analysts and rating agencies;                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (h)    | review and  recommend to the Board for approval the Corporation’s issuance and redemption  of securities, financial commitments and limits, and any material changes  underlying any of these commitments;                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (i)    | at least  annually, obtain and review the external auditors’ report with respect to the  auditing firm’s internal quality-control procedures, any material issues  raised by the most recent internal quality-control review or peer review of  the auditing firm, any inquiry or investigation by governmental or  professional authorities within the preceding five years undertaken respecting  one or more independent audits carried out by the external auditors, and any  steps taken to deal with any such issues; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (j)    | review  quarterly with senior management and the Chief Legal Officer, and as  necessary, outside legal advisors, and the Corporation’s internal and  external auditors, the effectiveness of the Corporation’s internal controls  to ensure the Corporation is in compliance with legal and regulatory  requirements and with the Corporation’s policies;                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (k)    | review  quarterly with the Chief Legal Officer, and, if necessary, outside legal  advisors, significant legal, compliance or regulatory matters that may have a  material effect on the Corporation’s financial statements;                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (l)    | review and  consider, as appropriate, any significant reports and recommendations made by  internal audit relating to internal audit issues, together with management’s  response thereto;                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (m)    | review  changes in accounting practices or policies and the financial impact these  may have on the Corporation;                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (n)    | discuss with  the external auditors their perception of the Corporation’s financial and  accounting personnel, any recommendations which the external auditors may  have, including those contained in the management letter, with respect to  improving internal financial controls, choice of accounting principles or  management reporting systems, and review all management letters from the  external auditors together with management’s written responses thereto;                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (o)    | review with  management, the external auditors and, as necessary, internal and external  legal counsel, any litigation, claim or contingency, including tax  assessments, that could have a material effect upon the financial position of  the Corporation, and the manner in which these may be or have been disclosed in  the financial statements;                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (p)    | review  annually the Annual Pension Report and financial statements of the  Corporation’s pension plans including the actuarial valuation,  asset/liability forecast, asset allocation, manager performance and plan  operating costs;                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (q)    | together with the Human Resources Committee of the  Board, review annually, and as required, the overall governance of the  Corporation’s Pension Plans, approving the broad                                                                                                                                                                                                                                                                                                                                                     |

 

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|   | objectives  of the plans, the statement of investment policy, the appointment of  investment managers, and reporting thereon to the Board annually;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (r)    | review  annually the internal audit department’s charter, the scope and plans for the  work of the internal audit group, the adequacy of the group’s resources, the  internal auditors access to all functions, records, property and personnel of  the Corporation. The Committee shall also inform the internal auditors and  management that the internal auditors shall have unfettered access to the  Committee, as well as the Committee to the internal auditors;                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (s)    | meet  separately with management, the external auditors and internal auditors to  review issues and matters of concern respecting audits and financial  reporting;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (t)    | review the  annual audit of expense accounts and perquisites of the Directors, the CEO  and his direct reports and their use of Corporate assets;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (u)    | review  annually the Corporation’s annual sponsorship, donations and political  contributions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (v)    | review  management’s processes relating to the assessment of potential fraud,  programs and controls to mitigate the risk of fraud and the process put in  place for monitoring the risks within targeted areas;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (w)    | review with  the Corporation’s senior financial management and the Vice-President Internal  Audit the adequacy of the Corporation’s systems of internal control and  procedures;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (x)    | review  disclosures made to the Committee by the CEO and Chief Financial Officer (the  “CFO”) during their certification process for the relevant periodic reports  filed with securities regulators to ensure that information required to be  disclosed is recorded, processed, summarized and reported within the time  periods specified for the reporting period. Obtain assurances from the CEO  and CFO as to the adequacy and effectiveness of the Corporation’s disclosure  controls and procedures and systems of internal control over financial  reporting and that any fraud involving management or other employees who have  a significant role in the Corporation’s internal controls was reported to the  Committee; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (y)    | establish  procedures for the receipt, retention and treatment of complaints received by  the Corporation regarding accounting, internal accounting controls or  auditing matters and the confidential, anonymous submission by employees of  concerns regarding accounting or auditing matters;                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (z)    | review all  incidents, complaints or information reported through the Ethics Help Line  and/or management;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (aa)   | review  disclosure made to the Committee by the Chief Executive Officer, Chief Financial  Officer and/or Chief Legal Officer of a material violation of applicable  securities laws, a material breach of a fiduciary duty under applicable laws  or a similar material violation by the Corporation or by any officer,  director, employee or agent of the Corporation, which has been reported to  the Committee, determine whether an investigation is necessary regarding any  such report and report to the board;                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (bb)   | discuss with  management and the external auditors any correspondence from or with  regulators or governmental agencies, any employee complaints or any published  reports that raise material issues regarding the Corporation’s financial  statements or accounting policies;                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (cc)   | report annually to shareholders on the work of the  Committee during the year;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

 

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| (dd)   | review and  approve the Corporation’s hiring policies for employees or former employees  of the external auditors and monitor the Corporation’s adherence to the  policy; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                |
| (ee)   | recommend to the Human Resources Committee the appointment,  termination or transfer of the Vice-President, Internal Audit.                                                         |

 

2.                                       Risk Management

 

The Committee provides oversight of management’sestablishment of an overall risk culture for the Corporation.  The Committee shall oversee and approve theprocesses established and developed by management for the identification of theCorporations principal risks, the evaluation of potential impact and theimplementation of appropriate systems to mitigate and manage the risks.

 

The Committee shall:

 
| (a) | review annually with the Board management’s assessment of the  significant risks to which the Corporation is exposed; discuss with  management the Corporation’s policies and procedures for identifying and  managing the principal risks of its business in order to ensure that  management: |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (i)    | has  identified appropriate business strategies to take into account the principal  risks identified, and                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                        |
| (ii)   | is maintaining systems and procedures to manage or mitigate those  risks, including programs of loss prevention, insurance and risk reduction  and disaster response and recovery programs; |

 
| (b)    | receive and  review managements’ quarterly risk assessment update including an update on residual  risks, emergent risks and next steps;                                                                                                                                                                                                                                                                                                                                  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (c)    | review the  Corporation’s enterprise risk management framework and reporting methodology;                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (d)    | review  annually the Corporation’s Financial and Commodity Exposure Management  Policies and approve changes to such policies; review and authorize the  Corporation’s strategic hedging program guidelines and risk tolerance; review  and monitor quarterly results of financial and commodity exposure management  activities, including foreign currency and interest rate risk strategies,  counterparty credit exposure and the use of derivative instruments; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (e)    | review the  Corporation’s annual insurance program, including the risk retention  philosophy, and potential exposure and corporate liability protection  programs for directors and officers including directors’ and officers’  insurance coverage;                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (f)    | periodically  consider the respective roles and responsibilities of the external auditor,  the internal audit department, internal and external counsel concerning risk  management of the Corporation and review their performance in relation to  such roles and responsibilities; and                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (g)    | annually, together with management report to the Board on:                                                                                                                                                                                                                                                                                                                                                                                                                     |

 
| (i)    | the  Corporation’s strategies in light of the overall risk profile of the Corporation;                 |
|--------|-------------------------------------------------------------------------------------------------------------|
|   |                                                                                                        |
| (ii)   | the nature  and magnitude of all significant risks the Corporation is exposed to;                           |
|   |                                                                                                        |
| (iii)  | the processes, policies, procedures and controls in  place to manage or mitigate the significant risks; and |

 

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| (iv) | the overall effectiveness of the enterprise risk management process. |
|------|----------------------------------------------------------------------|

 

**D.**                                    Compliance and Powers of theCommittee

** **
| (a)    | The  responsibilities of the Committee complies with applicable Canadian laws and  regulations, such as the rules of the Canadian Securities  Administrators, and with the disclosure and listing requirements of the  Toronto Stock Exchange, as they exist on the date hereof. In addition this  Charter complies with applicable US laws, such as the Sarbanes-Oxley Act and  the rules and regulations adopted thereunder, and with the New York  Stock Exchanges’ corporate governance standards, as they exist on the date  hereof. This Charter is reviewed from time to time by the Corporate Secretary  together with the Chair of the Committee in order to ensure on going  compliance with such standards. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (b)    | The Committee may, at the request of the Board or on  its own initiative, investigate such other matters as are considered  necessary or appropriate in carrying out its mandate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

 

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# ** **

# **APPENDIX “B” – GLOSSARY OF TERMS**

# ** **

This Annual Information Form includes the following defined terms:

 

“**AEUB**” means the then Alberta Energy andUtilities Board;

 

“**Alberta PPA**” means an Albertagovernment mandated power purchase arrangement;

 

“**availability**” means the “weightedaverage equivalent availability factor”, which is a term used to calculateavailability for a pool or fleet of units of varying sizes. It is a measure oftime and energy expressed in percentage of continuous operation, 24 hours aday, 365 days a year, that a generating unit is capable of generatingelectricity, whether or not it is actually generating electricity;

 

“**capacity**” means net maximum capacitythat a unit can sustain over a period of time;

 

“**gigawatt hour**” or “**GWh**”means one million kilowatt hours of electrical power;

 

“**kilowatt**” or “**kW**”means 1,000 watts of electrical power;

 

“**kilowatt hour**” or “**kWh**”means one hour during which one kilowatt of electrical power has beencontinuously produced;

 

“**megawatt**” or “**MW**”means 1,000 kilowatts or one million watts of electrical power;

 

“**megawatt hour**” or “**MWh**”means 1,000 kilowatt hours;

 

“**watt**” means the scientific unit ofelectrical power, being the rate of energy use that gives rise to the productionof energy at a rate of one joule per second;

 

“**watt hour**” is a measure of energyproduction or consumption equal to one watt produced or consumed for one hour;and

 

“**WPPI**” means the Government of Canada’sWind Power Production Incentive available to approved wind generationfacilities commissioned between April 1, 2002 and March 31, 2007.

 

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