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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Information Form contains both historical and
forward-looking statements within the meaning of Section 27A of the U.S.
Securities Act and Section 21 E of the U.S. Exchange Act.
 In some cases, forward-looking statements can be identified by terms such
as “may”, “will”, “believe”, “expect”, “potential”, “enable”, “continue” or
other comparable terminology.  These statements are not guarantees of
TransAlta’s future performance and are subject to risks, uncertainties and other
important factors that could cause TransAlta’s actual performance to be
materially different from those projected.  Some of the risks,
uncertainties, and factors include, but are not limited to: legislative and
regulatory developments that could affect revenues; cost; the speed and degree
of competition entering the market; global capital markets activity; timing and
extent of changes in commodity prices; prevailing interest rates; currency
exchange rates; inflation levels and general economic conditions in geographic
areas where TransAlta operates; results of financing efforts; changes in
counterparty risk; and the impact of accounting policies issued by Canadian and
U.S. standard setters.  Given these uncertainties, the reader should not
place undue reliance on these forward-looking statements.

These and additional factors are described in more detail under
“Risk Factors”, below, and in management’s discussion and analysis of financial
condition and results of operations for the year ended December 31, 2004,
which is hereby specifically incorporated by reference in this Annual
Information Form.

GLOSSARY OF TERMS

This Annual Information Form includes the following defined
terms:

“AEUB” means the Alberta Energy and Utilities Board;

“Alberta PPA” means an Alberta government mandated power
purchase arrangement;

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

“capacity” means net maximum capacity that 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 been continuously produced;

“megawatt” or “MW” means 1,000 kilowatts of
electrical power;

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

“PPA” means a power purchase agreement having an initial
term of five years or greater;

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

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- 3 -



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

“WPPI” means the Government of Canada’s Wind Power
Production Incentive available to approved wind generation facilities
commissioned between April 1, 2002 and March 31, 2007.

CORPORATE STRUCTURE

Name
and Incorporation

TransAlta Corporation (“TransAlta” or the “Corporation”) is a
corporation amalgamated under the Canada Business Corporations
Act.  The registered office and principal place of business of
TransAlta are at 110 - 12th Avenue S.W., Calgary, Alberta, Canada,
T2R 0G7.

Intercorporate
Relationships

The principal subsidiaries of the Corporation and their respective
jurisdictions of formation are set out below.





Notes:

(1)

All interests shown are 100 per cent ownership interests unless
otherwise indicated.

(2)

The limited partnership interests in TransAlta Power, L.P.
(“TransAlta Power”) are held by the public, other than a 0.01 per cent interest
held by TransAlta Power Ltd., the general partner of TransAlta Power.

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- 4 -



Unless the context otherwise requires, all references to the
“Corporation” and to “TransAlta” herein refer to TransAlta Corporation and its
subsidiaries, including TransAlta Utilities Corporation and TransAlta Energy
Corporation (“TransAlta Energy”).

OVERVIEW

TransAlta and its predecessors have been engaged in the production
and sale of electric energy since 1911.  The Corporation is among Canada’s
largest non-regulated electric generation and energy marketing companies with an
aggregate net ownership interest of approximately 8,444 MW of electrical
generating capacity in facilities having approximately 10,143 MW of aggregate
electrical generating capacity.  The Corporation is focused on generating
electricity in Canada, the United States, Mexico and Australia through its
diversified portfolio of facilities fueled by coal, gas, hydro, wind and
geothermal resources.  The following is a brief overview of the
Corporation’s principal facilities.

In Canada, the Corporation holds a net ownership interest of
approximately 5,575 MW of electrical generating capacity in coal-fired,
gas-fired, wind-powered and hydroelectric facilities, including 4,878 MW in
Alberta and 697 MW in Ontario.

In the United States, the Corporation’s principal facilities
include a 1,404-MW coal-fired facility and a 248-MW gas-fired facility, both
located in Centralia, Washington, which supply electricity to the Pacific
Northwest.  In January 2003, the Corporation completed the acquisition of a
50 per cent interest in CE Generation, LLC (“CE Generation”) which has an
aggregate net ownership interest of approximately 378 MW of electrical
generating capacity in facilities in California, Texas, Arizona and New
York.

In Mexico, the Corporation owns two facilities with a combined
capacity of 511 MW.

The Corporation also has an aggregate net ownership interest of
280 MW of electrical generating capacity in Australia.

The Corporation is organized into two business segments:
Generation and Energy Marketing.  The Generation group is responsible for
constructing, operating and maintaining power generation facilities.  The
Energy Marketing group is responsible for managing the sale of production,
purchases of natural gas, transmission capacity and market risks associated with
the Corporation’s generation assets and for non-asset backed trading activities.
 Both segments are supported by a corporate group which includes finance,
treasury, legal, human resources and other administrative functions.  The
corporate group is also responsible for the Corporation’s sustainable
development initiatives, including investments in renewable energy
resources.

GENERAL DEVELOPMENT OF THE BUSINESS

The significant events and conditions affecting TransAlta’s
business during the last three financial years are summarized below.
 Certain of these events and conditions are discussed in greater detail
under the heading “Business of TransAlta” in this Annual Information Form.

Significant Events since December 31, 2004

- On March 1, 2005, the Corporation
  announced the completion of the 450 MW Genesee 3 generating facility, a joint
  venture between the Corporation and EPCOR Utilities Inc.  See “Generation
  Business Segment –Alberta - Coal-fired facilities”.

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- On February 15, 2005, the
  Corporation redeemed, at par, all of its outstanding 7.5 per cent and 8.15 per
  cent preferred securities, with an outstanding principal amount of $175
  million and $125 million, respectively.
- On January 3, 2005, the Corporation
  announced that it had shut down and retired Units 1 (62 MW) and 2 (57 MW) of
  its Wabamun facility, effective December 31, 2004.  See “Generation
  Business Segment –Alberta - Coal-fired facilities”.

Year
ended December 31, 2004

- On December 10, 2004, the
  Corporation announced that it had applied to the AEUB to amend its 900 MW
  Centennial permit to allow for the construction of a smaller 450 MW facility
  using improved technology. See “Generation Business Segment – Alberta –
  Coal-fired facilities”.
- On December 3, 2004, the
  Corporation announced the sale by TransAlta Energy of an aggregate of 7.114
  million limited partnership units of TransAlta Power at a net price of $9.00
  per unit for net proceeds of $64.0 million. The units sold by TransAlta
  represented the remaining limited partnership units of TransAlta Power held by
  TransAlta Energy following the expiration on August 3, 2004 of the unit
  purchase warrants issued to the public on July 31, 2003 in connection with the
  acquisition by TransAlta Power of a 25 per cent interest in the Sheerness
  facility.  TransAlta recorded a gain of $13.4 million after-tax ($0.07
  per common share) as a result of the sale of the units.
- On December 1, 2004, TransAlta
  announced the completion of the sale of its 50 per cent interest in the 220-MW
  gas-fired Meridian power plant to TransAlta Cogeneration, L.P. (“TA Cogen”),
  an Ontario limited partnership for $110 million.  The purchase price for
  the Meridian facility was funded by TA Cogen through the issuance to each of
  TransAlta Power and TransAlta Energy of $30 million of limited partnership
  units of TA Cogen, the payment of $50 million in cash and the issue of a
  promissory note to TransAlta Energy for $30.0 million.  The subscription
  by TransAlta Energy for limited partnership units of TA Cogen enabled the
  Corporation to retain its 50 per cent interest therein.  TransAlta
  recorded an after-tax gain of approximately $11.5 million ($0.06 per common
  share) as a result of the sale.  See “TA Cogen and TransAlta
  Power.”
- On October 13, 2004, TransAlta
  announced the commencement of commercial operations of the $100 million
  68-MW Summerview wind farm located approximately 200 kilometres southwest of
  Calgary, Alberta. The Summerview facility consists of 38 1.8 MW Vestas V80
  wind turbines and brings TransAlta’s total operated wind generation capacity
  to 187 MW, including approximately 150 MW of wind energy owned, and all of
  which is operated through its division, Vision Quest Windelectric (“Vision
  Quest”). The Summerview wind farm is a merchant facility and
  TransAlta receives the Government of Canada’s 10-year Wind Power Production
  Incentive (“WPPI”) on the output.   See “Generation Business Segment
  — Alberta — Wind Generation Facilities”.
- On October 5, 2004, TransAlta
  completed the acquisition of a dam, a 1 MW hydroelectric generating facility
  and related assets on the Skookumchuk River near Centralia, Washington, for
  approximately US $7.5 million.  These facilities are used in connection
  with TransAlta’s generation facilities at Centralia, Washington.
- At December 31, 2004, TransAlta had
  a US $51.4 million receivable relating to energy sales in California.  At
  December 31, 2000, TransAlta had made a provision of US $28.8 million to
  account for potential refund liabilities relating to those energy sales in
  California.  On March 17, 2004, the California Independent System
  Operator released its preliminary adjusted prices indicating that TransAlta’s
  refund liability was US $46.0 million.  Based on those preliminary refund
  estimates, in the first quarter of 2004





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- 6 -



TransAlta increased its provision for potential refund liabilities
by US $17.2 million (Cdn. $22.9 million) to US $46.0 million.  The final
adjusted prices were released in October 2004 and were substantially the same as
those released in March 2004.  TransAlta has prepared a petition for relief
from the refund obligation that may be filed once the U.S. Federal Energy
Regulatory Commission provides stakeholders with a direction on the filing of
such positions.

Year
ended December 31, 2003

- In December 2003, TransAlta sold
  539 acres of undeveloped land at Seebe, Alberta for $11 million.  The
  sale of land was part of a company- wide initiative to sell land and close
  housing sites that were no longer required for the power generation
  business.
- In September 2003, TransAlta
  announced the commencement of commercial operations at its 259-MW Chihuahua
  combined-cycle gas-fired facility located near Ciudad de Juarez, Mexico,
  approximately 40 kilometres south of the United States - Mexico border.
   In May 2003, the Corporation announced the commencement of commercial
  operations at its 252-MW combined-cycle gas/diesel facility located in the
  Mexican state of Campeche in the Yucatan Peninsula.  Mexico’s
  government-owned utility, Comisión Federal de Electricidad, has agreed to
  purchase 100 per cent of the electricity output of each of the Chihuahua
  and Campeche facilities under 25-year contracts with TransAlta.  See
  “Generation Business Segment — Mexico”.
- On July 30, 2003, TransAlta
  announced the completion of the sale of its 50 per cent interest in the 756-MW
  coal-fired Sheerness facility to TA Cogen.  The Corporation realized cash
  proceeds of $246.5 million from the sale, of which $149.9 million
  was received by the Corporation at the closing of the transaction and an
  additional $96.6 million was received from the sale of limited partnership
  units held by TransAlta Energy upon the exercise of warrants to purchase
  limited partnership units which were issued to the public as part of the
  financing and concurrent with the sale.  Pursuant to the sale, the
  Corporation also received limited partnership units of TA Cogen to enable the
  Corporation to retain its 50 per cent interest therein.  See “TA Cogen
  and TransAlta Power”.
- On July 2, 2003, TransAlta,
  through Vision Quest, announced the completion of the approximately
  $100 million 75-MW McBride Lake wind farm consisting of 114 - 660 kW wind
  turbines.  The McBride Lake facility, in which the Corporation holds a 50
  per cent ownership interest, is fully contracted under a 20-year PPA.
   The Corporation is entitled to receive WPPI payments in respect of the
  McBride Lake facility until 2013.  See “Generation Business Segment —
  Alberta — Wind Generation Facilities”.
- On May 9, 2003, TransAlta
  announced the completion of the sale and leaseback of its head office building
  in Calgary to Forum Leasehold Partners Inc. (“FLPI”) for a purchase price of
  $65.8 million.  In connection with the sale, TransAlta agreed to
  lease the property from FLPI for a term of 20 years.  The property is
  comprised of three buildings of two to 10 storeys and contains an aggregate of
  335,000 square feet of rentable area.  The complex serves as corporate
  headquarters for over 500 TransAlta head office employees.
- In April 2003, TransAlta disposed
  of its interest in an Australian gas transmission pipeline for cash proceeds
  of AUD $24.1 million (Cdn. $21.6 million).
- In March and April 2003, TransAlta
  completed a public offering in Canada of 17.25 million common shares for
  gross proceeds of $276 million.





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- 7 -



- On January 29, 2003, TransAlta
  announced the completion of the acquisition from El Paso Merchant Energy North
  America Company (“El Paso”) of a 50 per cent interest in CE Generation for
  total consideration of approximately US $240 million, which included
  approximately US $35 million in working capital.  See “Business of
  TransAlta — Generation Business Segment — United States”.
- On January 13, 2003, TransAlta
  completed the acquisition from EPCOR Utilities Inc. and certain of its
  affiliates (collectively, “EPCOR”) of a 50 per cent interest in EPCOR’s 450-MW
  Genesee 3 facility, construction of which was completed in March 2005, for an
  estimated total cost of approximately $375 million.  Commercial operation
  of this facility, now operated by EPCOR, began in March 2005.

TransAlta also announced that it granted to EPCOR: (i) an
option, exercisable until December 31, 2005, to co-develop the
Corporation’s 450-MW Centennial 1 project (formerly known as Keephills 3) at a
price of 50 per cent of expenditures to the date of the option exercise, plus 50
per cent of future project development costs; and (ii) an option,
exercisable until March 2004, to purchase a 50 per cent interest in the
Corporation’s 575-MW Sarnia facility at a price equal to 50 per cent of the
undepreciated capital cost, as at the date of closing.  EPCOR did not
exercise its option on the Sarnia facility prior to the expiry of that option.
 See “Generation Business Segment — Alberta — Coal-fired Facilities”.

Year
ended December 31, 2002

- In December 2002, TransAlta
  acquired the remaining shares of Vision Quest, now a division of TransAlta
  Energy, bringing its ownership interest to 100 per cent.  The financial
  and operating results of Vision Quest are now included in the Generation
  business segment.
- In December 2002, TransAlta
  acquired the remaining 15 per cent of the Australian Southern Cross Energy
  Partnership for AUD $8.5 million (Cdn. $7.2 million).  See
  “Business of TransAlta—Generation Business Unit — Australia”.
- In November 2002, TransAlta
  announced a phased decommissioning of its 537-MW coal-fired Wabamun facility
  located west of Edmonton, Alberta.  See “Business of TransAlta —
  Generation Business Segment — Alberta”.
- In August 2002, TransAlta completed
  construction of the 248-MW gas-fired facility in Centralia, Washington, at a
  cost of approximately US $210 million.  The Centralia facility
  increased TransAlta’s total capacity at Centralia from 1,404 MW to 1,652 MW.
   See “Business of TransAlta— Generation Business Segment — United
  States”.
- In April 2002, TransAlta completed
  the sale of its Alberta-based transmission business to AltaLink, L.P.





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Generation
Business Segment

The following table summarizes the Corporation’s generation
facilities operating, under construction or under development, as at March 15,
2005:

|Region                       | Facility                | Capacity(MW) | Ownership(%) | Net CapacityOwnership Interest | Fuel             | Revenue Source                   | ContractExpiry Date
|---------------------------- | ----------------------- | ------------ | ------------ | ------------------------------ | ---------------- | -------------------------------- | -------------------
|                             |                         |              |              |                                |                  |                                  |                    
|CanadaAlberta(23 facilities) | Keephills               | 766          | 100          | 766                            | Coal             | Alberta PPA                      | 2020               
|Sheerness                    | 764                     | 25           | 191          | Coal                           | Alberta PPA      | 2020                            
|Sundance                     | 2,020                   | 100          | 2,020        | Coal                           | Alberta PPA      | 2017, 2020                      
|Wabamun                      | 279                     | 100          | 279          | 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(1)                  | 2024               
|                             | Genesee 3               | 450          | 50           | 225                            | Coal             | Merchant                         | -                  
|                             | Centennial 1 (2)        | 450          | 100          | 450                            | Coal             | Merchant                         | -                  
|                             | Hydro assets (3)        | 801          | 100          | 801                            | Hydro            | Alberta PPA                      | 2013-2020          
|                             | Summerview              | 68           | 100          | 68                             | Wind             | Merchant                         | -                  
|                             | Castle River            | 44           | 100          | 44                             | Wind             | LTC/Merchant                     | 2004-2011          
|                             | McBride Lake            | 75           | 50           | 38                             | Wind             | LTC                              | 2022               
|                             | Total
      Alberta     | 6,411        |              | 5,328                          |                  |                                  |                    
|                             |                         |              |              |                                |                  |                                  |                    
|Ontario(4 facilities)        | Mississauga             | 108          | 50           | 54                             | Gas              | LTC                              | 2017               
|Ottawa                       | 68                      | 50           | 34           | Gas                            | LTC              | 2012                            
|Sarnia                       | 575                     | 100          | 575          | Gas                            | LTC/Merchant (4) | 2022                            
|                             | Windsor                 | 68           | 50           | 34                             | Gas              | LTC/Merchant (5)                 | 2016               
|                             | Total
      Ontario     | 819          |              | 697                            |                  |                                  |                    
|                             |                         |              |              |                                |                  |                                  |                    
|United States(16 facilities) | Centralia, WA           | 1,404        | 100          | 1,404                          | Coal             | Merchant                         | -                  
|Centralia Gas                | 248                     | 100          | 248          | Gas                            | Merchant         | -                               
|Binghamton, NY               | 47                      | 100          | 47           | Gas                            | Merchant         | -                               
|Skookumchuk, WA              | 1                       | 100          | 1            | Hydro                          | -                | -                               
|Power Resources, TX          | 200                     | 50           | 100          | Gas                            | LTC              | 2005                            
|                             | Saranac, NY             | 240          | 37.5         | 90                             | Gas              | LTC                              | 2009               
|                             | Yuma, AZ                | 50           | 50           | 25                             | Gas              | LTC                              | 2024               
|                             | Geothermal              |              |              |                                |                  |                                  |                    
|                             | Facilities
      (6)    | 327          | 50           | 163                            | Geothermal       | LTC
      and Merchant           | 2016-2035          
|                             | Salton
      Sea VI (2) | 180          | 50           | 90                             | Geothermal       | -                                | -                  
|                             | Total
      US          | 2,697        |              | 2,168                          |                  |                                  |                    
|                             |                         |              |              |                                |                  |                                  |                    
|Mexico(2 facilities)         | Campeche                | 252          | 100          | 252                            | Gas/Diesel       | LTC                              | 2028               
|Chihuahua                    | 259                     | 100          | 259          | Gas                            | LTC              | 2028                            
|                             | Total
      Mexico      | 511          |              | 511                            |                  |                                  |                    
|                             |                         |              |              |                                |                  |                                  |                    
|Australia(5 facilities)      | Parkeston               | 110          | 50           | 55                             | Gas              | LTC                              | 2016               
|Southern Cross (7)           | 225                     | 100          | 225          | Gas/Diesel                     | LTC              | 2016                            
|                             | Total
      Australia   | 335          |              | 280                            |                  |                                  |                    
|                             |                         |              |              |                                |                  |                                  |                    
|Total                        |                         | 10,773       |              | 8,984                          |                  |                                  |                    



Notes:

(1)

Approximately 200 MW of the total 356 MW capacity are contracted
under a LTC.





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- 9 -



(2)

These facilities are currently under development.

(3)

Comprised of 13 facilities.

(4)

Approximately 250 MW of the total 575 MW capacity are contracted
under LTCs.

(5)

Approximately 50 MW of the total 68 MW capacity are contracted
under a LTC.

(6)

Comprised of 10 facilities.

(7)

Comprised of 4 facilities.



Canada:
 Alberta

Coal-fired
facilities

The following table summarizes the Corporation’s Alberta
coal-fired generation facilities:

|Location   | Plant                    | Capacity (MW) | Ownership (%) | Commissioning Dates
|---------- | ------------------------ | ------------- | ------------- | -------------------
|           |                          |               |               |                    
|Wabamun(1) | Wabamun
      Unit No. 4 | 279           | 100           | 1968               
|Sundance   | Sundance Unit No. 1      | 280           | 100           | 1970               
|           | Sundance Unit No. 2      | 280           | 100           | 1973               
|           | Sundance Unit No. 3      | 353           | 100           | 1976               
|           | Sundance Unit No. 4      | 353           | 100           | 1977               
|           | Sundance Unit No. 5      | 353           | 100           | 1978               
|           | Sundance Unit No. 6      | 401           | 100           | 1980               
|Keephills  | Keephills Unit No. 1     | 383           | 100           | 1983               
|           | Keephills Unit No. 2     | 383           | 100           | 1984               
|Sheerness  | Sheerness Unit No. 1     | 386           | 25            | 1986               
|           | Sheerness Unit No. 2     | 378           | 25            | 1990               
|Genesee    | Genesee
      3          | 450           | 50            | 2005               
|Keephills  | Centennial 1 (2)         | 450           | 100           | -                  
|Total      |                          | 4,729         |               |                    
|           |                          |               |               |                    

Notes:

(1)

In the fourth quarter of 2002, TransAlta announced its decision to
implement a phased decommissioning of its Wabamun facility.  The 139-MW
unit 3 was shut down in November 2002.  Units 1 (62 MW) and 2 (57MW) were
shut down on December 31, 2004 and unit 4 is expected to be removed from service
upon the expiry of its license in 2010.

(2)

These facilities are currently under development.



The Keephills, Sundance and Wabamun facilities (the “Alberta
thermal plants”) are located approximately 70 kilometres west of Edmonton,
Alberta.  The Sheerness facility is located northeast of Calgary, Alberta
and is jointly owned by TA Cogen and ATCO Power Ltd. (“ATCO Power”).  The
Corporation completed the sale of its 50 per cent interest in the Sheerness
facility to TA Cogen on July 30, 2003.  The Corporation’s coal-fired
plants are generally all base load plants, meaning that they are expected to
operate for long periods of time at maximum output.  Availability is an
important measure of the economic success of a coal-fired plant.  The
weighted equivalent availability factor for the coal-fired Alberta thermal
plants in 2004 was 86.5 per cent, compared with 86.5 per cent in 2003 and 87.2
per cent in 2002.  For Sheerness plant, the weighted equivalent
availability factor was 90.2 per cent in 2004 compared with 93.8 per cent in
2003 and 93.7 per cent in 2002.  The lower availability in 2004 at
Sheerness was due to a shut down from May to July to allow for maintenance and a
capacity uprate of unit 1 of that plant.

Fuel requirements for TransAlta’s coal-fired power facilities are
supplied by surface strip coal mines located in close proximity to the
facilities.  TransAlta owns two surface mines in Alberta that supply coal
to its Wabamun, Sundance and Keephills facilities.  The Whitewood mine
supplies the Wabamun plant and the Highvale mine supplies the Sundance and
Keephills facilities.  TransAlta estimates that the recoverable coal
reserves contained in these mines are sufficient to supply the anticipated
requirements of these facilities for over 50 years.





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- 10 -



Coal for the Sheerness facility is provided from the adjacent
Sheerness mine.  The coal reserves of the mine are owned, leased or
controlled jointly by TA Cogen, ATCO Power and Luscar Ltd.  TA Cogen and
ATCO Power have entered into coal supply agreements with Luscar Ltd., which
operates the mine, to supply coal until 2026.

In February 2001, the Corporation announced a proposal for a 900
MW expansion at its Keephills facility.  In February 2002, the Corporation
received regulatory approval to proceed with the expansion, which contemplated
the facilities being operational in 2003.  On December 10, 2004, the
Corporation announced that it had applied to the AEUB to amend its 900 MW
Centennial permit to allow for the construction of a smaller 450 MW facility
using improved technology.

The Corporation is in the process of updating a feasibility study
factoring in the impact of Alberta’s transmission constraints, environmental
requirements that may be imposed by Alberta Environment, and market conditions,
to determine whether to pursue the expansion.  The proposed plant design
has been adapted to meet expected new environmental requirements beginning in
2006.  Material variations to the project or to the construction schedule
may require an amendment to the AEUB approval.  In January 2003, the
Corporation announced that it had granted to EPCOR an option, exercisable until
December 31, 2005, to purchase a 50 per cent interest in the Corporation’s
450-MW Centennial 1 project (formerly known as Keephills 3) at a price of 50 per
cent of expenditures to the date of the option exercise, plus 50 per cent of
future project development costs.

On January 13, 2003, the Corporation completed the
acquisition from EPCOR of a 50 per cent joint venture interest in EPCOR’s 450-MW
Genesee 3 facility located southwest of Edmonton, Alberta.  On March 1,
2005 EPCOR and TransAlta announced the completion of the Genesee 3 facility,
which cost approximately $375 million and will be operated by EPCOR.  Coal
for this facility will be supplied from an adjacent mine.

Gas-fired
Facilities

The following table summarizes the Corporation’s Saskatchewan and
Alberta gas-fired generation facilities:

|Location                    | Plant                   | Capacity (MW) | Ownership (%) | Commissioning Dates
|--------------------------- | ----------------------- | ------------- | ------------- | -------------------
|                            |                         |               |               |                    
|Lloydminster, SK            | Meridian                | 220           | 25            | 1999               
|Fort
      McMurray, AB     | Poplar
      Creek      | 356           | 100           | 2001               
|Fort Saskatchewan,
      AB | Fort
      Saskatchewan | 118           | 30            | 1999               
|Total                       |                         | 694           |               |                    
|                            |                         |               |               |                    

The Meridian plant sells electricity to Saskatchewan Power
Corporation, a crown corporation owned by the Province of Saskatchewan, and
steam to a heavy oil upgrader in Lloydminster, Saskatchewan.  The
Corporation completed the sale of its 50 per cent interest in the Meridian
facility to TA Cogen on December 1, 2004.  The remaining 50 per cent
interest in the Meridian facility is held by Husky Oil Operations Limited.

The Poplar Creek plant provides electricity and steam to Suncor
Energy Inc.’s oil sands project.  This 356-MW cogeneration facility became
fully operational in the first quarter of 2001 and delivers approximately 200 MW
of electricity and steam to Suncor Energy Inc. (“Suncor”).  Any surplus
power not used by Suncor is available for sale by the Corporation to other
parties, in which case Suncor is entitled to a share of that revenue, under
certain conditions.

The Corporation also holds an indirect interest in the 118-MW Fort
Saskatchewan gas-fired combined cycle cogeneration facility in Alberta, which
provides electricity and steam to Dow Chemical Canada Inc.  The
Corporation’s interest in the Fort Saskatchewan facility is held through TA
Cogen.  See “TA Cogen and TransAlta Power”.





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Hydroelectric
facilities

The following table summarizes the Corporation’s wholly-owned
Alberta hydroelectric facilities:

|Location                              | Plant               | Capacity (MW) | Commissioning Dates
|------------------------------------- | ------------------- | ------------- | -------------------
|                                      |                     |               |                    
|Bow
      River System                | Horseshoe           | 14            | 1911               
|                                      | Kananaskis          | 19            | 1913,
      1951   
|                                      | Ghost               | 51            | 1929,
      1954   
|                                      | Cascade             | 36            | 1942,
      1957   
|                                      | Barrier             | 13            | 1947               
|                                      | Bearspaw            | 17            | 1953,
      1954   
|                                      | Pocaterra           | 15            | 1955               
|                                      | Interlakes          | 5             | 1955               
|                                      | Spray               | 103           | 1951,
      1960   
|                                      | Three
      Sisters | 3             | 1951               
|                                      | Rundle              | 50            | 1951,
      1960   
|                                      |                     |               |                    
|North
      Saskatchewan River System | Brazeau             | 355           | 1965,
      1967   
|                                      | Bighorn             | 120           | 1972               
|Total                                 |                     | 801           |                    
|                                      |                     |               |                    

The Corporation’s hydroelectric facilities are primarily peaking
plants, meaning they are generally only operated during times of peak
demand.

Wind
Generation Facilities

The following table summarizes the Corporation’s Alberta wind
generation facilities:

|Location            | Plant                        | Capacity (MW) | Ownership (%) | Commissioning Dates
|------------------- | ---------------------------- | ------------- | ------------- | -------------------
|                    |                              |               |               |                    
|Fort
      Macleod  | McBride
      Lake           | 75            | 50            | 2003               
|Pincher
      Creek | Castle
      River and Other | 44            | 100           | 1997 –
      2001  
|Pincher
      Creek | Summerview (1)               | 68            | 100           | 2004               
|Total               |                              | 187           |               |                    
|                    |                              |               |               |                    

Note:

(1)

This does not include a 1.8 MW exploratory turbine previously
located at the Summerview site acquired by Vision Quest in 2004.

All of the Corporation’s wind generation facilities and assets are
operated by Vision Quest.  The Corporation, through Vision Quest, owns
approximately 150 MW of net capacity and operates approximately 187 MW of
capacity primarily in three wind farms in Southwestern Alberta.

Castle River is a 40-MW facility comprised of 59 Vestas V47 (660
kW) turbines and 1 Vestas V44 (600 kW) turbine located at Pincher Creek,
Alberta.  The facility is 75 per cent contracted primarily to ENMAX Energy
Corp. and is the sole Green Energy® provider to the City of Calgary’s “Ride the
Wind” Light Rail Transit program.  The Corporation, through Vision Quest,
also owns and operates seven additional turbines totalling 4 MW located in the
Pincher Creek and Waterton areas of Southwestern Alberta.





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McBride Lake, one of Canada’s largest wind generation facilities,
is comprised of 114 Vestas V47 (660 kW) turbines located at Fort Macleod,
Alberta.  It was constructed by Vision Quest and was completed and
producing power in the third quarter of 2003.  McBride Lake is operated by
Vision Quest and is jointly owned with ENMAX Green Power Inc., with each partner
owning a 50 per cent interest.  The output from the facility is 100 per
cent contracted in the form of a 20-year PPA with Enmax.  The Corporation
is also entitled to receive Wind Power Production Incentive (“WPPI”) payments
from the Federal Government at $12/MWh in respect of the McBride Lake facility
until 2013.

On October 13, 2004, TransAlta announced the commencement of
commercial operations at its $100 million Summerview 68-MW wind farm
located approximately 15 kilometres northeast of Pincher Creek, Alberta.
 The Summerview facility, comprised of 38 1.8 MW turbines brings the total
owned capacity to approximately 150 MW and total operated capacity to
approximately 187 MW.  The Summerview wind farm is a merchant facility
but is entitled to receive WPPI payments from the Federal Government at $10/MWh
until 2014.

All of the power generated and sold by Vision Quest is from
generation facilities that are EcoLogo-certified.  Vision Quest is an
EcoLogo-certified distributor of Alternative Source Electricity through
Environment Canada’s Environmental Choice program.  EcoLogo certification
is granted to products with environmental performance that meet or exceed all
government, industrial safety and performance standards.  Vision Quest
facilities constructed after April 2001, also qualify for the Green E and Green
Leaf certifications.

Alberta
PPAs

All of the Corporation’s Alberta coal-fired and hydroelectric
facilities other than the Wabamun facility, operate under Alberta PPAs.
 These Alberta PPAs established committed capacity and electrical energy
generation requirements and availability targets to be achieved by each
coal-fired plant, energy and ancillary services obligations for the
hydroelectric plants, and the price at which power would be supplied.  The
Corporation bears the risk or retains the benefit of volume variances (except
for those arising from events considered to be force majeure, in the case
of the coal-fired plants) and any change in costs required to maintain and
operate the facilities.

Under the Alberta PPAs for the formerly regulated coal-fired
facilities, the Corporation is exposed to electricity price risk if production
declines below contracted levels (other than as a result of outages caused by an
event of force majeure).  In such circumstances, the Corporation
must pay a penalty for the lost production based upon a price equal to the
30-day trailing average of Alberta’s market electricity prices.  This
trailing average provision attempts to mitigate price spikes that can occur as a
result of sudden outages.  The Corporation attempts to further mitigate
this exposure by maintaining contracted and uncontracted capacity in the market
through operating and maintenance practices and through hedging activities
performed by the Corporation’s Energy Marketing group.

The Corporation’s hydroelectric facilities are not contracted on a
facility-by-facility basis; rather, facilities are aggregated in a single
Alberta PPA which provides for energy and ancillary services obligations based
on hourly targets.  These targeted amounts are met by the Corporation
through physical delivery or third party purchases.

The Corporation’s compensation under the Alberta PPAs is based on
a pricing formula which replaced the cost of service regime which applied
previously under utility regulation.  Key elements of the pricing formula
are the amount of common equity deemed to form part of the capital structure,
the amount of risk premium attributable to deemed common equity and a recovery
of fixed and variable costs.  Common equity is deemed to be 45 per cent of
total capital and the return on equity is set annually at a 4.5 per cent premium
over the rate on a 10-year Government of Canada bond.





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- 13 -



The pricing formula includes a provision for site restoration
costs of the coal-fired generating plants.  Restoration and reclamation
costs incurred in excess of those previously recovered through the pricing
formula may also be recovered, upon successful application to the AEUB.
 The Alberta PPAs do not provide compensation for site restoration costs
related to the Corporation’s hydroelectric facilities.  The Corporation
does not anticipate that its hydroelectric structures will be dismantled because
of the water supply, irrigation, flood control and recreation related purposes
they serve.  Provisions have been made for the removal of the hydroelectric
generating equipment.

The expiry dates for the Corporation’s Alberta PPAs, other than
for the Wabamun facility, range from 2013 to 2020.  The Alberta PPA for the
Wabamun facility expired at the end of December 2003.  The Corporation
holds various licenses from Alberta Environment and the AEUB to operate its
facilities, and it has procured an extension of the license to operate unit four
of the Wabamun facility until March 31, 2010.  The Corporation intends to
procure extensions of the licenses for the other facilities upon the expiry of
each respective Alberta PPA.  Upon the expiry of the Alberta PPAs, the
Corporation will be able to sell its power output to the Alberta Power Pool and
to third party purchasers through direct sales agreements.  The Corporation
is currently selling power output from the Wabamun facility under such direct
sales agreements.

The Alberta PPAs (together with legislation which applies thereto)
permit the Balancing Pool, directly or indirectly as successor to the power
purchaser under the Alberta PPAs, to terminate the Alberta PPAs in certain
circumstances.  These termination provisions are similar to those found in
some PPAs entered into by government-related power purchasers.  The
Corporation will be entitled to receive a lump sum payment in connection with
any such termination, other than a termination resulting from the Corporation’s
default.  In any event, the Corporation will thereafter be able to sell the
output from any affected facilities for its own account.

Canada:
 Ontario

The Corporation’s Ontario generating facilities are summarized in
the following table:

|Location    | Plant       | Capacity (MW) | Ownership (%) | Commissioning Dates
|----------- | ----------- | ------------- | ------------- | -------------------
|            |             |               |               |                    
|Sarnia      | Sarnia      | 575           | 100           | 2003               
|Ottawa      | Ottawa      | 68            | 50.01         | 1992               
|Mississauga | Mississauga | 108           | 50.01         | 1992               
|Windsor     | Windsor     | 68            | 50.01         | 1996               
|Total       |             | 819           |               |                    
|            |             |               |               |                    

The Sarnia facility is comprised of a 440-MW facility which
commenced commercial operations in March, 2003 and an additional 135 MW of
electric generation capacity acquired by the Corporation in 2002.  The
combined 575-MW facility provides steam and electricity to nearby facilities
owned by Dow Chemical Canada Inc., Bayer Inc., Nova Chemicals (Canada) Ltd. and
Suncor Energy Products Inc.

The Ottawa plant is a combined cycle cogeneration facility
designed to produce 68 MW of electrical energy.  This capacity is sold
under a long-term contract with the Ontario Electricity Financial Corporation
(“OEFC”), an agency of the Province of Ontario.  This agreement expires in
2012.  The Ottawa plant also provides thermal energy to the member
hospitals and treatment centers of the Ottawa Health Sciences Centre, National
Defence Medical Centre and the Perley and Rideau Veterans’ Health Centre.

The Mississauga plant is a combined cycle cogeneration facility
designed to produce 108 MW of electrical energy.  This capacity is
contracted under a long-term contract with the OEFC which expires in 2017.
 The plant also supplies thermal energy to the Boeing Canada Inc.
manufacturing facility located adjacent to the Mississauga plant.





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- 14 -



The Windsor plant is a combined cycle cogeneration facility
designed to produce 68 MW of electrical energy.  Currently, 50 MW of the
capacity is sold under a long-term contract to the OEFC.  This agreement
expires in 2016.  The Windsor plant also provides thermal energy to
DaimlerChrysler Canada Ltd.’s minivan assembly facility in Windsor.  In
2003, an agreement was reached with the OEFC to sell the remaining 18 MW to the
Ontario power market when it is economic to do so.

The Corporation’s interests in the Mississauga, Ottawa and Windsor
facilities in Ontario are held through TA Cogen.  See “TA Cogen and
TransAlta Power”.

United
States

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

|Location                                                        | Plant                   | Capacity (MW) | Ownership (%) | Commissioning Dates
|--------------------------------------------------------------- | ----------------------- | ------------- | ------------- | -------------------
|                                                                |                         |               |               |                    
|Washington                                                      | Centralia Coal No. 1    | 702           |               | 100                
|                                                                | Centralia Coal No. 2    | 702           |               | 100                
|                                                                | Centralia Gas           | 248           |               | 100                
|                                                                | Skookumchuk             | 1             |               | 100                
|                                                                |                         |               |               |                    
|New
      York                                                  | Binghamton              | 47            |               | 100                
|                                                                | Saranac                 | 240           |               | 37.5               
|                                                                |                         |               |               |                    
|California                                                      | Vulcan                  | 34            |               | 50                 
|                                                                | Del
      Ranch         | 38            |               | 50                 
|                                                                | Elmore                  | 38            |               | 50                 
|                                                                | Leathers                | 38            |               | 50                 
|                                                                | CE
      Turbo          | 10            |               | 50                 
|                                                                | Salton
      Sea I      | 10            |               | 50                 
|                                                                | Salton
      Sea II     | 20            |               | 50                 
|                                                                | Salton
      Sea III    | 50            |               | 50                 
|                                                                | Salton
      Sea IV     | 40            |               |                    
|                                                                | Salton
      Sea V      | 49            |               | 50                 
|                                                                | Salton
      Sea VI (1) | 180           |               | 50                 
|                                                                |                         |               |               |                    
|Texas                                                           | Power
      Resources   | 200           |               | 50                 
|                                                                |                         |               |               |                    
|Arizona                                                         | Yuma                    | 50            |               | 50                 
|Total                                                           |                         | 2,697         |               |                    
|Note:
      (1)
      This
      facility is under development.

Centralia

The Corporation owns a two-unit 1,404-MW coal-fired facility and
adjacent mining operations located in Centralia, Washington, south of Seattle,
Washington and a 248-MW gas-fired facility at Centralia.  The Corporation
also owns a dam, a 1-MW hydro-electric generating facility and related assets on
the Skookumchuk River near Centralia, which facilities are used to supply water
to TransAlta’s other generation facilities at Centralia.

The Corporation has entered into a number of medium-to-long term
energy sales agreements for a portion of the capacity of the Centralia facility.
 The Corporation also sells power from the Centralia facility into the
Western Electricity Coordinating Council, and in particular, the U.S. Pacific
Northwest energy market, on the spot market.





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- 15 -



The Corporation’s strategy is to balance contracted and
non-contracted sales of electricity to manage production and price risk.

The Centralia mine produces approximately six million tonnes
of coal annually, or approximately 80 per cent of the Centralia plant’s annual
coal requirements.  The Corporation estimates that the permitted coal
reserves, being the amount of coal which can be mined under the existing
regulatory-approval, are sufficient to supply the anticipated requirements of
this facility for over 17 years, at current production levels.  The
Corporation currently imports the balance of its coal requirements by rail using
coal from the Powder River Basin, located in the U.S. Rocky Mountains, provided
under short-term contracts.

Binghamton

The Corporation owns a 47-MW gas-fired peaking facility in
Binghamton, New York.  This facility was commissioned in 1992 and is
located near the Pennsylvania and New York State border.  The Binghamton
facility provides electricity to the New York Power Pool during periods of high
demand.

CE
Generation

On January 29, 2003, TransAlta announced the completion of
the acquisition from El Paso of a 50 per cent interest in CE Generation, for
total consideration of approximately US $240 million, which included
approximately US $35 million for working capital.  The CE Generation
acquisition included the right to a 50 per cent interest in a geothermal project
currently under development in Imperial Valley, California.  If TransAlta
elects to retain a substantial economic interest and participate in a future
phase of this project, Salton Sea VI, TransAlta may be required to pay to El
Paso certain milestone payments of up to US $30 million.

CE Generation, through its subsidiaries, is primarily engaged in
the development, ownership and operation of independent power production
facilities in the United States using geothermal and natural gas resources.
 CE Generation holds a net ownership interest of approximately 379 MW in 13
facilities, having an aggregate operating capacity of 816 MW, including 327 MW
of geothermal generation in California and 490 MW of gas-fired cogeneration in
New York, Texas and Arizona.

CE Generation affiliates currently operate 10 geothermal
facilities in Imperial Valley, California.  Each of the geothermal
facilities, excluding CE Turbo and Salton Sea V, sells electricity pursuant to
independent, long-term contracts which provide for energy payments, capacity
payments and capacity bonus payments.  Salton Sea V is currently a merchant
facility; however, it has a power purchase agreement to sell approximately 20 MW
of its net output.  Available capacity from Salton Sea V and CE Turbo is
sold through market transactions.

CE Generation affiliates currently operate three natural gas-fired
facilities in Texas, Arizona and New York State having an aggregate generation
capacity of 490 MW.  The New York and Arizona facilities sell their output
pursuant to long term contracts while the Texas facility has contracted a
tolling agreement for capacity.





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- 16 -



Mexico

Campeche

In May 2003, the Corporation announced the commencement of
commercial operations at its 252-MW combined cycle gas/diesel fuelled facility
located in the Mexican state of Campeche in the Yucatan Peninsula.  The
Corporation and Mexico’s state-owned Comisión Federal de Electricidad (“CFE”)
have entered into a 25-year long term contract for all of the output of this
plant, commencing on the date commercial operations began.  The Corporation
has also entered into a related gas transportation agreement with CFE.  In
addition to the long term contract and gas transportation agreement, the
Corporation has entered into a corresponding 25-year fuel supply agreement with
Pemex Gas y Petro Quimica Basica.  CFE bears the price risk on fuel up to
the guaranteed heat rate under the long term contract.

Chihuahua

In September 2003, the Corporation announced the commencement of
commercial operations at its 259-MW Chihuahua combined-cycle gas-fired facility
located near Ciudad de Juarez, Mexico, located approximately 40 kilometres south
of the United States/Mexico border.  The Corporation has entered into a
25-year long term contract with CFE for all of the output of this plant,
commencing on the date commercial operations began.  The Corporation has
also entered into a related 25-year gas transportation agreement with CFE and a
5-year gas supply contract with Cynergy Marketing and Trading, LP.  CFE
bears the price risk on fuel up to the guaranteed heat rate under the long term
contract.

Australia

The Corporation holds interests in Western Australia consisting
of: (i) the 110-MW Parkeston generation facility through a 50/50 joint
venture with Newmont Power Pty Limited, a subsidiary of Newmount Australia
Limited; and (ii) the 225-MW Southern Cross gas and diesel generation
facilities.  The Corporation’s  8.82 per cent interest in a 1,380
kilometre gas transmission pipeline that delivers natural gas from the
Australian northwest shelf producing area to Western Australia was sold in April
2003.

TA
Cogen and TransAlta Power

The Corporation’s interest in the 220-MW Meridian gas-fired
generator facility in Saskatchewan, the 756-MW Sheerness coal-fired generation
facility and the 118-MW Fort Saskatchewan gas-fired cogeneration facility in
Alberta, and the Mississauga, Ottawa and Windsor-Essex facilities in Ontario,
are held through TA Cogen, an Ontario limited partnership owned 50.01 per cent
by subsidiaries of TransAlta and 49.99 per cent by TransAlta Power, another
Ontario limited partnership.  The Corporation formed TA Cogen in 1998 to
directly or indirectly hold interests in generation facilities capable of
producing stable cash flows that would be distributed to TransAlta Power’s
unitholders.  The partnership units of TransAlta Power are publicly traded
on the Toronto Stock Exchange.

Energy
Marketing Business Segment

The Energy Marketing group provides a number of strategic
functions to the Corporation, including the following:

- Gathering and assessing market
  intelligence, enabling management to more effectively engage in strategic
  planning and decision-making for the Corporation.  This includes
  identifying and ranking markets which are the most attractive to enter,
  developing strategies and plans to effectively compete in each market where
  the Corporation operates, and identifying specific opportunities to develop or
  acquire assets that will capture value or mitigate risks in the electric
  generation business;





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- 17 -



- Negotiating and entering into
  contractual agreements with customers for the sale of output from the
  Corporation’s generating assets, including electricity, steam or other energy
  related commodities;
- Scheduling physical deliveries of
  natural gas supplies used to generate electricity and the electrical
  generation outputs from each asset to meet contractual obligations while
  managing the physical and financial risks associated with the generation and
  transmission of electrical energy, including during those periods of unplanned
  outages;
- Increasing the value of electricity
  output and fuel inputs from each generating asset through a variety of
  regional portfolio optimization strategies in both the current year and over
  the long term; and
- Recommending optimum maintenance
  schedules and operating levels according to current and anticipated market
  conditions that will maximize earnings from each of the generation
  assets.

Beyond these functions, the Energy Marketing group derives
additional revenue and earnings from the wholesale trading of electricity and
other energy related commodities and derivatives.  An important factor in
the group’s trading success has been the ability to access transmission capacity
in selective markets, which allows TransAlta to take advantage of price
differentials between regional markets by buying and selling energy at different
locations and using transmission capacity to deliver the energy from the lower
value markets into higher value markets.

The group seeks to manage and limit risk exposures from both
financial and physical positions, as well as counterparty risks.  The key
risk control activities of the Energy Marketing group, in conjunction with other
functions of the Corporation, include credit review approval and reporting, risk
measurement monitoring and reporting, validation of transactions, and trading
portfolio valuation monitoring and reporting.

The Corporation uses mark-to-market valuation and the application
of a value at risk (“VAR”) determination for risk control practices for its
trading portfolios.  This approach is a measure of assessing the potential
trading losses that the Corporation could experience over a given time, due to
fluctuations in energy prices in each market.  The Corporation’s policy is
to actively manage and limit the group’s aggregate VAR exposure to
$10.0 million at any point in time.  The average daily VAR in 2004 was
approximately $3.8 million, as compared to $3.6 million in 2003.

Competitive
Environment

As the largest generator of electricity in Alberta, measured by
capacity, and with generation assets in Ontario, the U.S. Pacific Northwest,
California, Arizona, Texas and New York, Mexico and Australia, the Corporation
believes it is well-positioned to capitalize on opportunities in these regions.
 Alberta is Canada’s fourth largest province by population with
approximately 3.2 million residents representing approximately 10 per cent
of Canada’s total population.  Alberta consumed approximately 65,000 GWh of
electricity in 2004.  As at December 31, 2004, the aggregate installed
capacity of generating facilities in Alberta was approximately 11,900 MW.

Ontario is Canada’s largest province with approximately
12.3 million residents representing approximately 39 per cent of Canada’s
total population.  Ontario consumed approximately 153,000 GWh of
electricity in 2004.  Ontario Power Generation Inc., the successor to the
generation business of Ontario’s former integrated electric utility, controls
over two-thirds of Ontario’s approximately 31,700 MW of installed capacity, the
balance of which is owned by municipal electric utilities and private
independent power producers or industrial consumers.





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- 18 -



Electrical utilities in the U.S. Pacific Northwest are organized
into the Western Electricity Coordinating Council (“WECC”).  The WECC is
the largest geographically of the 10 regions in the North American Electric
Reliability Council and is divided into four sub-regions, of which Region 1
includes British Columbia, Alberta, Washington, Oregon, Idaho, Montana, Utah,
western Wyoming and northern Nevada.  This sub-region is referred to as the
Northwest Power Pool (the “NWPP”).  The WECC estimates that approximately
366,000 GWh of electricity was consumed in the NWPP in 2004.  The WECC also
reported an estimated aggregate electrical generating capacity of approximately
78,000 MW in the NWPP by the end of 2004.

The Corporation expects that the demand for electricity will
continue to grow in its target markets, although some markets are currently
overbuilt.  In addition to increased demand, the market for electricity in
some of these regions has undergone deregulation.  Legislation in Alberta
and Ontario and many states in the United States mandated the unbundling of
generation, transmission and distribution services traditionally provided by
vertically integrated utilities to promote competition in the market for
generation, which caused some integrated utilities to sell all or parts of their
generation assets.  While the pace of this process has changed, the
Corporation believes that the combination of increased demand for electricity,
deregulation and the increased availability of generation assets may provide it
with an opportunity to increase its generation capacity and leverage its energy
marketing capabilities, provided that in doing so, the financial position of the
Corporation is not compromised.

In addition, the Corporation believes that the demand for
electricity in Mexico will continue to grow in the next several years due to
increased commercial and residential consumption.  For the period 2004 to
2013, the CFE is projecting a growth in demand for electricity of 5.6 per cent
per year.  It is expected that independent power plants will contribute up
to 30 per cent of the installed capacity and contribute approximately 50 per
cent of the total energy produced.  At the end of December 2003 the
national electrical system had 44,554 MWs.  With proposed retirements of
4,188 MWs and 24,249 MWs expected to be built over the period from 2004 to 2013,
the system is expected to have about 64,615 MWs by the end of December 2013.
 As a result, the CFE has indicted that it is planning to offer for tender
more independent power plants that may be similar to the Corporation’s plants in
Campeche and Chihuahua.

The Corporation believes that yearly fluctuations in demand,
similar to those which occurred in 2004, will continue in Mexico.  In 2004,
dispatch was lower than anticipated in the northern part of the country due to
lower than expected demand and higher than average water in the region’s dams,
which resulted in more power produced from hydro-electric facilities.  This
did not occur in 2004 in the south-eastern part of Mexico, where the Campeche
plant is located.

Competitive
Strengths

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

Stable cashflow base. In 2004, approximately 83
per cent of the Corporation’s aggregate production was sold under contracts with
durations of at least 12 months and 70 per cent was sold under contracts with
original terms of 10 years or more.  Approximately 50 per cent of the
contracted output was sold under Alberta PPAs, most of which expire from 2013 to
2020 and are ultimately backed by the “Balancing Pool”; an entity established by
the Government of Alberta.  See “Generation Business Segment — Alberta —
Alberta PPAs”.

Geographic diversity. The Corporation has a
geographically diverse asset base with assets in Alberta and Ontario, Canada, in
certain parts of the United States, in Mexico and in Australia.

Fuel diversity.  The Corporation has a diverse mix of
fuels used for electrical generation, including coal, natural gas, hydro,
geothermal and wind.  The Corporation believes that this mix reduces the
impact on corporate performance in the event of external events affecting one
fuel source.





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Management team.  The Corporation’s management team
has changed significantly in the last four years as the Corporation has moved
from a largely Alberta-based and focused regulated utility into an
internationally focused deregulated electricity developer, generator and
marketer.  The current management team has substantial industry,
international and local market experience.

Energy Marketing expertise.  The Corporation believes
that its Energy Marketing group has enhanced returns from the Corporation’s
existing generation base and has allowed the Corporation to obtain more
favourable pricing for uncommitted electricity, secure fuel supply on a
cost-effective basis and fulfil electricity delivery obligations in the event of
an outage.

Financial strength.  The Corporation has investment
grade issuer ratings from Moody’s Investor Services, Inc., Standard &
Poor’s, a division of the McGraw-Hill Companies, Inc. and Dominion Bond Rating
Service Limited.

Ownership or control of coal supply.  The Corporation
owns, controls or leases extensive coal reserves in Alberta that provide a
long-term and stable source of fuel for all of its coal-fired generation
capacity in Alberta.  The Corporation also owns a coal mine near its
Centralia facility, which currently provides approximately 80 per cent of the
fuel required at the Centralia facility.  The Corporation’s mines in
Alberta contain some of the lowest sulphur coal in North America, averaging 0.25
per cent sulphur at the Whitewood mine and 0.25 per cent at the Highvale mine.
 Coal with lower sulphur content emits less sulphur dioxide when it is
burned.  By comparison, the sulphur content of coal mined in the Powder
River Basin in the U.S. Rocky Mountains typically has sulphur content of about
0.35 per cent.

Wind Generation.  The Corporation, through Vision
Quest, is one of the largest owners and operators of wind generation in Canada.
 Vision Quest’s management team collectively has over 50 years of
experience in the industry and has developed key relationships with customers,
suppliers and policy makers that provide a competitive advantage in the
development, operations and marketing of wind generation.

Capital
Expenditures

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

|2004                         
      $  365.8 million2003                         
      $  879.1 million2002                         
      $  985.9 million |  | 2001                            
      $1,256.3 million
      2000                            
      $1,675.1 million
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------



Capital expenditures of between $360 and $375 million are
forecast for 2005.

Environmental
Risk Management

TransAlta is subject to federal, provincial and local
environmental laws, regulations and guidelines concerning the generation and
transmission of electrical and thermal energy and surface mining.
 TransAlta is committed to complying with legislative and regulatory
requirements and to minimizing the environmental impact of its operations.
 TransAlta works with governments and the public to develop appropriate
frameworks to protect the environment and, at the same time, to promote
sustainable development.

TransAlta’s Environmental Policy requires that the environmental
impacts and risks of Company activities are identified, assessed and managed.
 This is done by two means

- use of an environmental management
  system to set environmental objectives and regularly review subsequent
  performance with senior management; and





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- 20 -



- mitigative action on longer-term
  environmental policy impacts such as climate change.

TransAlta has implemented an ISO-based environmental, health and
safety management system (the “EHS Management System”) designed to continuously
improve environmental and safety performance.  As of December, 2004, 95 per
cent of TransAlta’s facilities had implemented the EHS Management System, and
implementation of the system is ongoing at the remainder of the Corporation’s
operated facilities.  Compliance with both regulatory requirements and
management system standards is regularly audited through TransAlta’s
“Performance Assurance” policy and results are reported on a quarterly basis to
the Corporation’s board of directors.

To meet regulatory requirements and improve environmental
performance, TransAlta made environmental operating and capital expenditures in
fiscal year 2004 of approximately $38.0 million. Environmental expenditures
are generally defined as expenditures incurred to comply with Canadian or
international environmental regulations, conventions or voluntary
agreements.

Environmental risk at the plants operated by TransAlta, has been
reduced through improved performance in several areas:

·

sulphur dioxide (“SO2”)
emission rates were reduced from 1.27 kg/MWh in 2003 to 1.23 kg/MWh in
2004;

·

gross carbon dioxide emission rates
were 0.88 tonnes/MWh in 2004, a reduction of  9 per cent from 2003;
and

·

safety performance, as measured by
reduced injury frequency rate, has improved by 17 per cent over the past 12
months as a result of the Corporation’s focused corporate safety program, known
as “Target Zero”.

On a longer time horizon, TransAlta anticipates future
environmental regulatory developments in areas such as climate change, air
quality and water.  Regulatory changes and policy developments are tracked
in all relevant jurisdictions in Canada and the U.S.

Canada is currently the only country in which TransAlta operates
which has emission reduction obligations under the Kyoto Protocol.  The
Protocol will come into force in 2005, with greenhouse gas reductions for
industry required to begin in 2008.  While uncertainty still exists as to
the ultimate form and specific detail of Canada’s climate change regulations,
TransAlta’s climate change strategy addresses the potential competitive risks to
its fossil generation plants.  That strategy includes increased use of less
carbon-intensive fuels such as natural gas and renewable resources, continued
investment in international emission offsets, internal efficiency improvements
and development of clean coal technology.  By 2004, TransAlta had reduced
its worldwide greenhouse gas emissions by 13 per cent from 1990 levels, in spite
of increasing generation by approximately 83 per cent over the same period.
 It continues to be an active participant with federal and provincial
governments in the development of climate change policy in the international,
national and provincial arenas.  Additionally in 2004, TransAlta purchased
1.75 million tonnes of verified emission reductions as part of its offsets
portfolio, which will be registered as certified emission reductions by the
Kyoto Executive Board.  These credits will be used for compliance of its
Canadian generation facilities, under an anticipated greenhouse gas regulatory
program.

In 2004, the Alberta Government adopted a new air quality policy
framework based on stakeholder input and recommendations.  These policies
provide regulatory clarity to the Alberta electricity industry for the next 20
years, beginning in 2006, and would postpone additional nitrous oxide (“NOx”)
and SO2 controls until after the expiry of the Alberta PPAs.
 Mercury standards are expected to be implemented in the United States by
2009 and in Alberta by 2010.  TransAlta is a member of the Canadian Clean
Power Coalition, which is committed to developing and implementing clean coal
technology projects in Canada before 2010.





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- 21 -



Environmental issues concerning water use are managed within the
ISO 14001 framework.  TransAlta continues to work closely with regulators
in each jurisdiction within which it operates, to ensure water is used wisely on
site and that all regulations pertaining to water and wetlands management both
on and off site are met at all times.

TransAlta’s environmental efforts have been recognized by the Dow
Jones Sustainability Index for five years in a row, being awarded the top
electric utility in 2004.  The Index represents the best environmental
performance leaders worldwide.

To date, TransAlta does not believe that its competitive position
in the wholesale generation business has been adversely affected by
environmental concerns.  Increasing use of natural gas and renewable
generation means typically lower environmental compliance costs.  Emissions
of NOx and SO2 from coal-fired operations at Centralia are
significantly below national average levels due to installed pollution controls,
including scrubbers and low-NOx burners for all units.  In
addition, the PPAs for TransAlta’s coal-fired plants in Alberta contain “Change
of Law” provisions that TransAlta believes will provide recovery for compliance
costs, from the PPA customers.

RISK FACTORS

Regulatory and political risks exist in all jurisdictions in which
TransAlta operates, including foreign jurisdictions.  TransAlta seeks to
manage these risks by working with regulators and other stakeholders to try to
resolve issues as fairly and expeditiously as possible.  For a discussion
of risk factors affecting TransAlta and risk management, reference is made to
“Risk Factors and Risk Management”, located in TransAlta’s Management’s
Discussion and Analysis for the year ended December 31, 2004, which is
incorporated by reference herein.

EMPLOYEES

As of December 31, 2004, the Corporation had 2,505 full and
part-time employees, of which 2,109 were employed in TransAlta’s generation
business and 153 were employed in TransAlta’s energy marketing business.
 Approximately 1,450 of the Corporation’s employees are represented by
labour unions.  The Corporation is currently a party to 12 different
collective bargaining agreements.   Of its 12 existing collective
bargaining agreements, the Corporation has recently renewed seven of the
agreements and anticipates negotiating renewed agreements with the other five
labour unions in 2005.

CAPITAL STRUCTURE

General

The Corporation’s authorized share capital consists of an
unlimited number of common shares and an unlimited number of first preferred
shares, issuable in series.  As atMarch 15, 2005,
195,181,925 million common shares were outstanding and no first preferred
shares were outstanding.

Common
Shares

Each common share of the Corporation entitles the holder thereof
to one vote for each common share held at all meetings of shareholders of the
Corporation, except meetings at which only holders of another specified class or
series of shares are entitled to vote, to receive dividends if, as and when
declared by the board of directors, subject to prior satisfaction of
preferential dividends applicable to any first preferred shares, and to
participate rateably in any distribution of the assets of the Corporation upon a
liquidation, dissolution or winding up, subject to prior rights and privileges
attaching to the first preferred shares.  The common shares are not
convertible and are not entitled to any pre-emptive rights.  The common
shares are not entitled to cumulative voting.





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- 22 -



First
Preferred Shares

The Corporation is authorized to issue an unlimited number of
first preferred shares, issuable in series and, with respect to each series, the
board of directors is authorized to fix the number of shares comprising the
series and determine the designation, rights, privileges, restrictions and
conditions attaching to such shares, subject to certain limitations.

The first preferred shares of all series rank senior to all other
shares of the Corporation with respect to priority in payment of dividends and
with respect to distribution of assets in the event of liquidation, dissolution
or winding up of the Corporation, or a reduction of stated capital.
 Holders of first preferred shares are entitled to receive cumulative
quarterly dividends on the subscription price thereof as and when declared by
the board of directors at the rate established by the board of directors at the
time of issue of shares of a series.  No dividends may be declared or paid
on any other shares of the Corporation unless all cumulative dividends accrued
upon all outstanding first preferred shares have been paid or declared and set
apart.  In the event of the liquidation, dissolution or winding up of the
Corporation, or a reduction of stated capital, no sum shall be paid or assets
distributed to holders of other shares of the Corporation until the holders of
first preferred shares shall have been paid the subscription price of the
shares, plus a sum equal to the premium payable on a redemption, plus a sum
equal to the arrears of dividends accumulated on the 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 of first
preferred shares shall not be entitled to share further in the distribution of
the assets of the Corporation.

The Corporation’s board of directors may include in the share
conditions attaching to a particular series of first preferred shares certain
voting rights effective upon the Corporation failing to make payment of six
quarterly dividend payments, whether or not consecutive.  These voting
rights continue for so long as any dividends remain in arrears.  These
voting rights are the right to one vote for each $25 of subscription price on
all matters in respect of which shareholders vote, and additionally, the tight
of all series of first preferred shares, voting as a combined class, to elect
two directors of the Corporation if the board of directors then consists of less
than 16 directors, or three directors if the board of directors consists of 16
or more directors.  Otherwise, except as required by law, the holders of
first preferred shares shall not be entitled to vote or to receive notice of or
to attend at any meeting of the shareholders of the Corporation.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

Reference is made to the section entitled “Management’s Discussion
& Analysis” set out at pages 22 to 62 of TransAlta’s 2004 Annual Report,
which is specifically incorporated by reference in this Annual Information
Form.





---

- 23 -



DIVIDENDS

TransAlta’s board of directors considers several factors when
reviewing the Corporation’s common share dividend policy, including earnings,
cash flow, capital requirements, the expectations of shareholders and future
earnings prospects.  The payment and level of future dividends on the
common shares will be determined by the board of directors of TransAlta upon
consideration of such factors.  TransAlta has declared and paid the
following dividends per share on its outstanding common shares during the past
three years:

Period
    
    Dividendper Common Share2002
    First
      Quarter
    $ 0.25Second
      Quarter
    $ 0.25Third
      Quarter
    $ 0.25Fourth
      Quarter
    $ 0.252003
    First
      Quarter
    $ 0.25Second
      Quarter
    $ 0.25Third
      Quarter
    $ 0.25Fourth
      Quarter
    $ 0.252004
    First
      Quarter
    $ 0.25Second
      Quarter
    $ 0.25Third
      Quarter
    $ 0.25Fourth
      Quarter
    $ 0.25


On January 1, 2005, TransAlta paid cash dividends of $0.25
per common share.  The Corporation’s board of directors has declared a cash
dividend of $0.25 per common share, payable on April 1, 2005.

CREDIT RATINGS

Commercial
Paper

The
Corporation’s guaranteed commercial paper is rated R-1(low) stable by Dominion
Bond Rating Service Limited (“DBRS”).

Senior
Unsecured Long-Term Debt



As of March 25, 2005, the Corporation’s senior unsecured long-term
debt, is rated BBB, with a negative trend, by DBRS, BBB- (stable) by Standard
& Poor’s, a division of McGraw Hill Companies (“S&P”) and Baa2 (outlook
negative) by Moody’s Investor Services (“Moody’s”).   The ratings for
debt instruments range from a high of AAA to a low of D in the case of both DBRS
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
of adequate credit quality.  Protection of interest and principal is
considered adequate, but the entity is more susceptible to adverse changes in
financial and economic conditions, or there may be other adversities present
which reduce the strength of the entity and its rated securities.  “High”
or “Low” grades indicate the relative standing within a rating category.
 DBRS also assigns rating trends to each of its ratings to give investors
an understanding of DBRS’ opinion regarding the outlook for the rating in
question.

According to the S&P rating system, debt securities rated BBB
exhibit adequate protection parameters.  However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on such obligations
than on obligations in the higher rating 15 categories.





---

- 24 -



The ratings from AA to B may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major rating
categories.

According to the Moody’s rating system, debt securities rated Baa
are subject to moderate credit risk.  They are considered medium-grade and
as such may possess certain speculative characteristics.  Numerical
modifiers 1, 2 and 3 are applied to each rating category, with 1 indicating that
the obligation ranks in the higher end of the category, 2 indicating a mid-range
ranking and 3 indicating a ranking in the lower end of the category.

Preferred
Securities

As of March 25, 2005, the Corporation’s outstanding preferred
securities have been assigned ratings of BB (stable) by S&P and Pfd-3y
(negative trend) by DBRS.

S&P’s rating of the Corporation’s outstanding preferred
securities is on a preferred share rating scale that ranges from AA to D, which
represents the range from highest to lowest quality of such securities rated.
 Securities rated in the BB rating category by S&P are in the fourth
highest category of the relevant scale.  An obligation rated “BB” faces
major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor’s inadequate capacity to
meet its financial commitment on the obligation.  The ratings from AA to B
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories.

DBRS’ rating of the Corporation’s outstanding preferred securities
is on a preferred share rating scale that ranges from Pfd-1 to D, which
represents the range from highest to lowest quality of such securities rated.
 Securities rated in the Pfd 3 rating category by DBRS are in the third
highest category of the relevant scale and are considered of adequate credit
quality.  The assignment of a “(high)” or “(low)” modifier within each of
the five preferred share rating categories indicates relative standing within
such category.  The “y” modifier is used to indicate a hybrid security.

Note
Regarding Credit Ratings

Credit ratings are intended to provide investors with an
independent measure of credit quality of an issue of securities.  The
credit ratings accorded to the Corporation’s outstanding securities by S&P,
Moody’s and DBRS, as applicable, are not recommendations to purchase, hold or
sell such securities in as much as such ratings do not comment as to market
price or suitability for a particular investor.  There is no assurance that
the ratings will remain in effect for any given period or that a rating will not
be revised or withdrawn entirely by S&P, Moody’s or DBRS in the future if,
in its judgment, circumstances so warrant.

MARKET FOR SECURITIES

TransAlta’s common shares are listed on the Toronto Stock Exchange
(the “TSX”) under the symbol “TA” and the New York Stock Exchange under the
symbol “TAC”.  TransAlta’s preferred securities are listed on the Toronto
Stock Exchange under the symbol “TA.PR.C”.  On February 15, 2005, the
Corporation redeemed, at par, all of its outstanding 7.5 per cent and 8.15 per
cent preferred securities, with an aggregate principal amount of $175 million
and $125 million, respectively.





---

- 25 -



The following table sets forth the reported high and low trading
prices and trading volumes of the Corporation’s common shares as reported by the
TSX from January 2004:

|                          | Price ($) |      
|------------------------- | --------- | -----
|Month                     | High      | Low  
|                          |           |      
|2004                      |           |      
|January                   | 18.79     | 17.66
|February                  | 18.14     | 17.46
|March                     | 18.65     | 17.77
|April                     | 18.47     | 15.25
|May                       | 17.40     | 16.68
|June                      | 17.00     | 16.00
|July                      | 16.85     | 15.40
|August                    | 16.22     | 15.40
|September                 | 16.99     | 15.67
|October                   | 16.98     | 15.80
|November                  | 18.05     | 16.31
|December                  | 18.74     | 17.30
|                          |           |      
|2005                      |           |      
|January                   | 19.35     | 18.02
|February                  | 19.50     | 17.80
|March
      (to March 24) | 18.89     | 17.67
|                          |           |      

The following table sets forth the reported high and low trading
prices and trading volumes of the Corporation’s 7.75 per cent preferred
securities due 2048 (trading symbol “TA.PR.C”) as reported by the TSX from
January 2004:

|                          | Price ($) |      
|------------------------- | --------- | -----
|Month                     | High      | Low  
|                          |           |      
|2004                      |           |      
|January                   | 27.65     | 26.52
|February                  | 27.60     | 26.86
|March                     | 27.34     | 26.80
|April                     | 27.32     | 25.41
|May                       | 26.20     | 25.58
|June                      | 26.15     | 25.51
|July                      | 26.18     | 25.73
|August                    | 26.60     | 25.80
|September                 | 26.40     | 25.81
|October                   | 26.95     | 26.20
|November                  | 26.97     | 26.48
|December                  | 26.99     | 26.75
|                          |           |      
|2005                      |           |      
|January                   | 26.95     | 26.55
|February                  | 27.45     | 26.66
|March
      (to March 24) | 27.21     | 26.46







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- 26 -



DIRECTORS AND OFFICERS

The names, principal occupations and municipalities of residence
of the directors and officers of TransAlta, as well as the year each director
first became a director are set out below.  Each director is appointed to
serve until the next annual meeting of TransAlta or until his or her successor
is elected or appointed.

Directors

|Name and
      Municipality of Residence             | Year first
      became Director | Principal
      Occupation                                                                                                                                                                                                                                                                                                                                                                                                  
|---------------------------------------------------- | -------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|William D. Anderson(1)Montreal,
    PQ               | 2003                             | President of BCE Ventures, a subsidiary of BCE Inc., and a
      director of Bell Canada International Inc. (both in
      telecommunications).                                                                                                                                                                                                                                                                             
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|Stanley J. Bright(1) (2)Vero Beach,
      FL         | 1999                             | Corporate Director.  He is a director of MidAmerican
      Energy Holdings Company (electric generation and delivery, natural gas
      supply, transportation and delivery), a subsidiary of Berkshire Hathaway,
      Inc.  Mr. Bright was formerly chair and CEO of MidAmerican Energy
      Company, a Des Moines, Iowa-based electric and gas utility which is now a
      part of MidAmerican Energy Holdings Company.
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|Jack
      C. Donald(2)
      Red
      Deer, AB     | 1993                             | Chair,
      Parkland Income Trust and president and Chief Executive Officer of
      Parkland Properties Ltd. (real estate holdings), also vice president and
      director of Brandt Industries Ltd. (manufacturing), Chair and a director
      of Canadian Western Bank (banking) and a director of Ensign Resource
      Services Group Inc. (drilling & servicing) and Sifton Energy Ltd.
       (energy).           
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|Timothy W. Faithfull(1)Oxford,
      U.K.            | 2003                             | Corporate Director.  He is a director of Canadian
      Pacific Railway Company (transportation) and AMEC plc. (engineering
      services and project management) and Shell Pension Trust Limited (pension
      fund trustee), in the U.K.  He is a former President and Chief
      Executive Officer of Shell
      Canada
      Limited (energy).                                                                      
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|John
      T. Ferguson, F.C.A(1) (2) (3)Edmonton, AB | 1981                             | Chair,
      TransAlta Corporation (power generation), Chair and a director of
      Princeton Developments Ltd. (commercial real estate development), and a
      director of Royal Bank of Canada (banking) and Suncor Energy Inc.
      (energy).                                                                                                                                                                        
|Gordon D. Giffin(3)Atlanta, GA                       | 2002                             | Senior
      Partner of McKenna Long & Aldridge LLP (attorneys).  From 1997 to
      2001 he served as United States Ambassador to Canada.  He is a
      director of Bowater, Inc., (newsprint and paper), Canadian National
      Railway Company (transportation), Canadian Imperial Bank of Commerce,
      (banking) and Canadian Natural Resources Ltd. (natural
  resources).                                        
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|Louis D. Hyndman, Q.C.(3)Edmonton,
      AB          | 1986                             | Senior
      Partner of Field LLP (barristers & solicitors), and a director of
      Canadian Urban Ltd. (real estate), EllisDon Inc. (construction), Enbridge
      Inc. (energy), Melcor Developments Ltd. (real estate), and Meloche Monnex
      Inc. (insurance).                                                                                                                                                      
|                                                     |                                  |                                                                                                                                                                                                                                                                                                                                                                                                                             





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- 27 -



|C.
      Kent Jespersen(2) (3)Calgary, AB            | 2004 | Corporate Director.  He is a Chair and a director of
      Geac Computer Corporation Limited (computer software) and CCR Technologies
      Ltd. (technology), lead director of Telesystem International Wireless Inc.
      (telecommunications), and a director of Matrikon Inc. (technology) and
      Axia NetMedia Corporation (telecommunications).
|---------------------------------------------------- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                     |      |                                                                                                                                                                                                                                                                                                                                                          
|Michael M. Kanovsky, P. Eng(1)
      (3)Victoria, BC | 2004 | Independent Businessman.  He is also a director of
      Accrete Energy Corporation, Devon Energy Corporation, ARC Energy Trust and
      Bonavista Energy Trust (all in the oil and gas business) and Pure
      Technologies Inc. (technology).                                                                                                        
|                                                     |      |                                                                                                                                                                                                                                                                                                                                                          
|Donna Soble Kaufman(2) (3)Toronto,
      ON          | 1989 | Lawyer
      and corporate director.  She is also a director of BCE Inc., Bell
      Canada, Telesat Canada (all telecommunications) and Hudson’s Bay Company
      (retail).                                                                                                                                                                            
|                                                     |      |                                                                                                                                                                                                                                                                                                                                                          
|Luis
      Vazquez Senties(2)Mexico City, MX         | 2001 | Chair
      of Group Diavaz (oilfield services and natural gas distribution).  He
      is also Chair of Compania Mexicana de Gas, S.A. de CV.                                                                                                                                                                                                           
|                                                     |      |                                                                                                                                                                                                                                                                                                                                                          
|Stephen G. SnyderCalgary, AB                         | 1996 | President and Chief Executive Officer of TransAlta
      Corporation (power generation).  He is also a director of Canadian
      Imperial Bank of Commerce (banking).                                                                                                                                                                                   
|                                                     |      |                                                                                                                                                                                                                                                                                                                                                          

Notes:

(1)

Member of the Audit and Environment Committee (see “Audit and
Environment Committee”).

(2)

Member of the Human Resources Committee.

(3)

Member of the Nominating and Corporate Governance Committee.



|Officers
      Name        | Principal
      Occupation                                          | Residence       
|-------------------------- | ------------------------------------------------------------------- | ----------------
|                           |                                                                     |                 
|Stephen
      G. Snyder    | President and Chief Executive Officer                               | Calgary, Alberta
|                           |                                                                     |                 
|Ian A.
      Bourne        | Executive Vice-President and Chief Financial Officer                | Calgary, Alberta
|                           |                                                                     |                 
|Linda
      K. Chambers    | Executive Vice-President, Technology                                | Calgary, Alberta
|                           |                                                                     |                 
|Frederick M. Gallagher     | Executive Vice-President, Vision Quest Windelectric                 | Calgary, Alberta
|                           |                                                                     |                 
|Thomas
      M. Rainwater  | Executive Vice-President, Corporate Development and
      Marketing | Calgary, Alberta
|                           |                                                                     |                 
|Robert
      M. Soeldner   | Executive Vice-President, Operations                                | Calgary, Alberta
|                           |                                                                     |                 
|Kenneth
      S. Stickland | Executive Vice-President, Legal                                     | Calgary, Alberta
|                           |                                                                     |                 
|Michael
      Williams     | Senior
      Vice-President, Human Resources                        | Calgary, Alberta
|                           |                                                                     |                 
|Gregory
      Wilson       | Senior
      Vice-President and Chief Information Officer           | Calgary, Alberta
|                           |                                                                     |                 





---

- 28 -



|William
      D.A. Bridge   | Vice-President, Customer and Asset Management                                                                            | Calgary, Alberta   
|--------------------------- | ------------------------------------------------------------------------------------------------------------------------ | -------------------
|                            |                                                                                                                          |                    
|Richard
      P. Langhammer | President, TransAlta Centralia Generation LLC and TransAlta
      Centralia Mining LLC., subsidiaries of the Corporation | Olympia, Washington
|                            |                                                                                                                          |                    
|Robert
      J.D. Page      | Vice-President, Sustainable Development                                                                                  | Calgary, Alberta   
|                            |                                                                                                                          |                    
|Gregory
      P. Reinhart   | Vice-President, Generation Human Resources                                                                               | Calgary, Alberta   
|                            |                                                                                                                          |                    
|Marvin
      J. Waiand      | Vice-President & Treasurer                                                                                               | Calgary, Alberta   
|                            |                                                                                                                          |                    
|Garth
      A. Wong         | Vice-President and Comptroller                                                                                           | Calgary, Alberta   
|                            |                                                                                                                          |                    
|W.
      Frank Hawkins      | Assistant Treasurer                                                                                                      | Calgary, Alberta   
|                            |                                                                                                                          |                    
|Alison
      T. Love        | Corporate Secretary                                                                                                      | Calgary, Alberta   
|                            |                                                                                                                          |                    

| |  | 
| |  | 

All of the directors and officers of TransAlta have held their
present principal occupations or executive positions with the same or associated
firms for the past five years, except for the following:

- Prior to December 2000, William D.
  Anderson was Chief Financial Officer of BCE Inc.
- Prior to May 2000, Stanley J.
  Bright was Vice-Chair of MidAmerican Energy Holdings Company and before
  January 1999 Mr. Bright was Chair and Chief Executive Officer of
  Iowa-Illinois Gas and Electric Company.
- From 1997 to 2001, Gordon D. Giffin
  served as United States Ambassador to Canada.
- Prior to July 2003, Tim Faithfull
  was President and Chief Executive Officer of Shell Canada Limited.
- Prior to July 2003, Linda Chambers
  was President of TransAlta Centralia Generation LLC and TransAlta Centralia
  Mining LLC, subsidiaries of TransAlta and prior to June 1999, she was Senior
  Vice-President of Human Resources of TransAlta.
- Prior to November 2002, Thomas
  Rainwater was President, Praxis Solutions, Inc. and prior to February 2000, he
  was Vice-President, Central Region, Illinova Energy Partners Inc., a division
  of Illinova Corporation.
- Prior to November 2002, Robert
  Soeldner was Vice-President, Strategic Initiatives, New York Independent
  System Operator; prior to 2001, he was Senior Director, Enron Europe, Ltd.;
  prior to August 1999, he was Director, Enron Energy Services; and prior to
  August 1998, he was General Manager, Enron International.
- Prior to January 2001, Kenneth
  Stickland was a senior partner at Burnet Duckworth & Palmer, LLP,
  Barristers & Solicitors.
- Prior to December 2002, Frederick
  Gallagher was Managing Director and Chief Executive Officer of Vision Quest
  Windelectric Inc.





---

- 29 -



- Prior to June 2002, Michael
  Williams was Vice-President of EMEA HR, Lucent Technologies; prior to April
  2001, he was senior director of EMEA HR, Cisco Systems; prior to September
  1999, he was Senior Director of Customer Advocacy HR, Cisco Systems; prior to
  May 1999, he was Executive Vice-President Organizational Transformation,
  Newbridge Networks Corp and prior to May 1998, he was Global Vice-President of
  Human Resources and Quality, Newbridge Networks Corp.
- Prior to June 2002, Gregory Wilson
  was Vice-President and Chief Information Officer of United Dominion Industries
  and prior to August 1998, he was Group IT Director of Scientific
  Atlanta.
- Prior to December 2003, Richard
  Langhammer was Vice-President, Plant Operations of TransAlta.
- Prior to February 2002, Gregory
  Reinhart was Human Resources Director, IPP of TransAlta and prior to June
  1999, he was Vice-President of Human Resources of Engage Energy Ltd.
- Prior to December 2003, Garth Wong
  was Director, Financial Operations, Generation of TransAlta.
- Prior to February 2001, Frank
  Hawkins was Director, Corporate Finance of TransAlta; prior to September 2000,
  he was Director, IPP Development; and prior to September 1998, he was
  Director, International Project Development of TransCanada PipeLines
  Limited.
- Prior to October 2001, Alison Love
  was Vice-President, General Counsel and Corporate Secretary of Canadian
  Pacific Limited; prior to October 1998, she was Vice-President, Administrative
  Services and Special Projects and prior to July 1998, she was Corporate
  Secretary and Associate General Counsel of TransCanada PipeLines
  Limited.

As of March 25, 2005, the directors and officers of TransAlta and
its subsidiaries as a group beneficially own, directly or indirectly, less than
one per cent of each class or series of the outstanding securities of
TransAlta.

AUDIT AND ENVIRONMENT COMMITTEE

General

The Corporation has established an Audit and Environment Committee
(the “AE Committee”) comprised of five members: William D. Anderson, Chair,
Stanley J. Bright, John T. Ferguson, Tim W. Faithfull and Michael M. Kanovsky.
Each member of the AE Committee is considered by the board of directors to be
“independent” and “financially literate” within the meaning of Multilateral
Instrument 52-110--Audit Committees.  In addition, TransAlta’s board of
directors has determined that Messrs. Anderson and Ferguson are  “audit
committee financial experts” within the meaning of Section 407 of the
United States Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

Mandate
of the AE Committee

The mandate of the AE Committee is to provide assistance to the
board of directors of the Corporation in fulfilling its oversight responsibility
to the shareholders of the Corporation, the investment community and others,
relating to  the integrity of the Corporation’s financial statements and
the financial reporting process, the systems of internal accounting and
financial controls, the internal audit function, the external auditors’
qualifications, independence, performance and reports, the legal and
environmental compliance programs as established by management and the board of
directors, and the risk identification, assessment and management program.
 In so doing, the AE Committee is responsible for maintaining an open
avenue of communication between the Committee, the external auditors, the
internal auditors and management of the Corporation.





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- 30 -



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

While the AE Committee has the responsibilities and powers set
forth herein, it is not the duty of the AE Committee to plan or conduct audits
or to determine that the Corporation’s financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
 This is the responsibility of management and the external auditors.

Management is responsible for preparing the interim and annual
financial statements and financial disclosure of the Corporation and for
maintaining a system of internal controls to provide reasonable assurance that
assets are safeguarded and that transactions are authorized, executed, recorded
and reported properly.  The AE Committee’s role is to provide direct,
meaningful and effective oversight of the Corporation’s financial reporting and
counsel to management without assuming responsibility for management’s
day-to-day duties.

AE
Committee Charter

The Charter of the Audit Committee is attached hereto as
Appendix A.

Relevant
Education and Experience of AE Committee Members

The following is a brief summary of the education or experience of
each member of the AE Committee that is relevant to the performance of his
responsibilities as a member of the AE Committee, including any education or
experience that has provided the member with an understanding of the accounting
principles used by TransAlta to prepare its annual and interim financial
statements.

|Name of AE
      Committee Member | Relevant
      Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|William
      D. Anderson         | Mr. Anderson is a Chartered Accountant.
      Mr. Anderson has served as Chief Executive Officer of a public
      company and as Chief Financial Officer of several public companies and, 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,
      accounting officer or controller with several public companies and as a
      director and audit committee member with several public
  companies.
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Stanley
      J. Bright           | Mr. Bright is a Certified Public Accountant and has
      served as a Chief Executive Officer, Chief Financial Officer and a
      corporate controller of several public companies.  Mr. Bright
      has actively supervised persons engaged in preparing, auditing, analyzing
      or evaluating financial statements with several companies. Mr. Bright
      also has experience actively overseeing or assessing the performance of
      companies in the preparation of financial statements.                                                                          
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|John T.
      Ferguson            | Mr. Ferguson is a Chartered Accountant.
       Mr. Ferguson has acted as a Chief Executive Officer of several
      companies and as Chief Financial Officer of a public company and, in such
      capacities, Mr. Ferguson has actively supervised persons engaged in
      preparing, auditing, analyzing or evaluating financial statements,
      Mr. Ferguson has also served as a director, officer and audit
      committee member of several public companies.                                                                                                        
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 





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- 31 -





|Tim W.
      Faithfull    | Mr. Faithfull acquired significant financial experience
      and exposure to accounting and financial issues as Chief Executive Officer
      of Shell Canada Limited and in his other capacities in his 36 years with
      the Royal Dutch/Shell group of companies.  Mr. Faithfull is also
      a director of another public company, Canadian Pacific Railway Company,
      and is a director of Shell Pension Trust Limited.
|------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Michael
      M. Kanovsky | Mr.
      Kanovsky has over 30 years of financial 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.                                                                                                                                                                                                

For the years ended December 31, 2004 and 2003, Ernst &
Young LLP and its affiliates were paid approximately $2.75 million and
$2.37 million, respectively, as detailed below:

Year ended December 312004
    2003Ernst
      & Young LLPAudit Services
    $1,336,999
    $1,015,916Audit-Related Services
    201,866
    143,521Tax Services
    1,062,479
    322,496Other Fees
    146,282
    886,644Total
    $2,747,626
    $2,368,577


The nature of each category of fees is described below:

Audit Services

Audit fees were paid for professional services rendered by Ernst
& Young LLP for the audit of the Corporation’s annual financial statements
or services provided in connection with statutory and regulatory filing or
engagements, including the translation from English to French of the
Corporation’s financial statements and other documents.

Audit-Related Services

The audit-related fees were primarily for work performed by Ernst
& Young LLP in relation to the Corporation’s financings and the sale of one
of its plants.

Tax Services

The majority of tax fees for 2004 related to the finalization of
tax credit recoveries for work which commenced prior to 2002.  In 2003, the
tax fees primarily related to compliance services provided, including services
relating to the filing of tax returns for the Corporation and its subsidiaries.

All Other Fees

In 2004, the majority of the amounts in “Other Fees” related to
the sublease of office space in Australia.  In 2003, the other fees
included services performed by Ernst & Young LLP in specific transactions
involving the Corporation including the acquisition of an interest in CE
Generation, the sale of the Corporation’s head office building and assistance in
various regulatory proceedings involving the Corporation.





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- 32 -



The AE Committee has considered whether the provision of services
other than audit services is compatible with maintaining the auditors’
independence.  In May 2002, the AE Committee adopted a policy that
prohibits TransAlta from engaging the auditors for “prohibited” categories of
non-audit services and requires pre-approval of the AE Committee for other
permissible categories of non-audit services, such categories as determined
under the Sarbanes Oxley Act.

LEGAL PROCEEDINGS

TransAlta is occasionally named as a party in various claims and
legal proceedings 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 the availability of insurance coverage.
 Although there can be no assurance that any particular claim will be
resolved in the Corporation’s favour, the Corporation does not believe that the
outcome of any claims or potential claims of which it is currently aware will
have a material adverse effect on the Corporation, taken as a whole, after
taking into account amounts reserved by the Corporation.  For further
information, please refer to Note  23 of the Corporation’s audited
consolidated financial statements for the year ended December 31, 2004,
which note is hereby incorporated by reference herein.

AUDITORS, TRANSFER AGENT AND REGISTRAR

Ernst & Young LLP, Chartered Accountants, 1000,440 - 2nd
Avenue, SW., Calgary, are the auditors of the Corporation.

The transfer agent and registrar for TransAlta’s common shares and
preferred securities is CIBC Mellon Trust Company in Vancouver, Calgary,
Winnipeg, Toronto and Montreal.  The transfer agent and registrar for the
common shares in the United States is Mellon Investor Services LLC at its
principal office in New York, New York.

ADDITIONAL INFORMATION

Additional information including compensation of directors and
officers of TransAlta, indebtedness of directors and officers of TransAlta,
principal holders of TransAlta’s securities, options to purchase securities and
interests of insiders in material transactions, where applicable, is contained
in TransAlta’s Management Proxy Circular dated  March 15,2005.
 Additional financial information is provided in TransAlta’s 2004 Annual
Report which contains audited comparative consolidated financial statements for
the most recently completed financial year and the Management’s Discussion and
Analysis.  The Management’s Discussion and Analysis contained in the 2004
Annual Report is specifically incorporated by reference and forms a part of this
Annual Information Form.  These documents and additional information with
respect to the Corporation are available at www.sedar.com.

In 2002, TransAlta adopted a procedure for employees, shareholders
or others to report concerns or complaints regarding accounting or auditing
matters on an anonymous, confidential basis to the AE Committee.  Such
submissions may be directed to the AE Committee c/o the Corporate Secretary of
the Corporation.

When the securities of TransAlta are in the course of distribution
pursuant to a preliminary short form prospectus or a short form prospectus,
TransAlta will, upon request to the Corporate Secretary, provide to any person
or company the following information:

1.

one
copy of this Annual Information Form, together with one copy of any document, or
the pertinent pages of any document, incorporated by reference in this Annual
Information Form;

2.

one
copy of the comparative consolidated financial statements of TransAlta for its
most recently completed financial year for which financial statements have been
filed together with the accompanying





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- 33 -



report
of the auditor and one copy of the most recent interim financial statements of
TransAlta that have been filed, if any, for any period after the end of its most
recently completed financial year;

3.

one
copy of TransAlta’s Management Proxy Circular in respect of its most recent
annual meeting of its shareholders that involved the election of directors;
and

4.

one
copy of any other documents that are incorporated by reference into the
preliminary short form prospectus or the short form prospectus and are not
requited to be provided under clauses (1), (2) or (3) above.

At any other time, TransAlta will, upon request, provide to any
person or company one copy of any documents referred to in clauses (1), (2) and
(3) above, provided that TransAlta may require the payment of a reasonable
charge if the request is made by a person or company who is not a security
holder of TransAlta.  For additional copies of this AIF or any of the
materials listed in this paragraph, please contact Investor Relations, TransAlta
Corporation at Box 1900, Station “M”, Calgary, Alberta, T2P 2M1; telephone:
1-800-387-3598 in North America outside of Calgary, or (403) 267-2520 in
Calgary and outside North America; fax: (403) 267-2590; e-mail:
investor_relations@transalta.com.





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A-1







APPENDIX A

CHARTER OF THE AUDIT AND ENVIRONMENT COMMITTEE

TRANSALTA CORPORATION

CHARTER

A.

Establishment of Committee and Procedures

1.

Composition
of Committee

The Audit and Environment Committee (the “Committee”) of the Board
of Directors of TransAlta Corporation (the “Corporation”) shall consist of not
less than three Directors.  All members of the Committee shall, in the
judgment of the Board, be independent and shall meet the requirements of
applicable laws, stock exchanges and regulatory bodies. Determinations as to
whether a particular director satisfies the requirements for membership on the
Committee shall be made by the full Board of Directors (the “Board”).

2.

Appointment
of Committee Members

Members of the Committee shall be appointed from time to time by
the Board, having taken into account the recommendation of the Nominating and
Corporate Governance Committee, and shall hold office at the pleasure of the
Board.

3.

Vacancies

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

4.

Committee
Chair

The Board shall appoint a Chair for the Committee on the
recommendation of the Nominating & Corporate Governance Committee.

5.

Absence
of Committee Chair

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

6.

Secretary
of Committee

The Committee shall appoint a Secretary who need not be a director
of the Corporation.

---

A-2



7.

Meetings

The Committee shall meet at least four times per year and shall
meet at such other times during each year as it deems appropriate.  In
addition, the Chair of the Committee or any of its members may call a special
meeting of the Committee at any time.

8.

Quorum

Three members of the Committee shall constitute a quorum.

9.

Notice
of Meetings

Notice of the time and place of every meeting shall be given in
writing (including by way of written facsimile communication or email) to each
member of the Committee at least 24 hours prior to the time fixed for such
meeting, provided, however, that a member may in any manner waive a notice of a
meeting; and attendance of a member at a meeting constitutes a waiver of notice
of the meeting, except where a member attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called.  Notice of every meeting shall also be provided to
the external and internal auditors.

10.

Attendance
at Meetings

At the invitation of the Chair of the Committee, other Board
members, officers or employees of the Corporation, the external auditors,
outside counsel and other experts or consultants may attend any meeting of the
Committee.

11.

Procedure,
Records and Reporting

Subject to any statute or the articles and by-laws of the
Corporation, the Committee shall fix its own procedures at meetings, keep
records of its proceedings and report to the Board when the Committee may deem
appropriate (but not later than the next meeting of the Board that follows a
Committee meeting).  The minutes of its meetings held since the last
meeting of the Board shall be made available at the next meeting of the
Board.

12.

The
Corporation’s Auditors

The Committee shall have the direct responsibility for the
appointment, compensation, retention and oversight of the external auditors
(including nominating the external auditors to be proposed for shareholder
approval in any management proxy circular).  The Committee shall serve as
the ultimate authority to which the Corporation’s external auditors are
accountable.  The Corporation shall provide appropriate funding, as
determined by the Committee, for payment of compensation to the external
auditors and any experts or advisors employed by the Committee.

The Committee shall meet with the external auditors, as the
Committee may deem appropriate, to consider any matter which the Committee or
auditors believe should be brought to the attention of the Board or the
Shareholders.

13.

Review
of Charter

The Committee shall review and reassess the adequacy of its
Charter at least annually or otherwise, as it deems appropriate, and propose
recommended changes to the Board.





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A-3



B.

General Mandate of Committee

The Committee provides assistance to the Board in fulfilling its
oversight responsibility to the shareholders, the investment community and
others, relating to the integrity of the Corporation’s financial statements and
the financial reporting process, the systems of internal accounting and
financial controls, the internal audit function, the external auditors’
qualifications, independence, performance and reports, the legal and
environmental compliance programs as established by management and the Board,
and the financial risk identification, assessment and management program.
 In so doing, it is the Committee’s responsibility to maintain an open
avenue of communication between the Committee, the external auditors, the
internal auditors and management of the Corporation.

The function of the Committee is oversight.   Management
is responsible for the preparation, presentation and integrity of the financial
statements of the Corporation.  Management of the Corporation is
responsible for maintaining appropriate accounting and financial reporting
principles and policy and internal controls and procedures that provide for
compliance with accounting standards and applicable laws and regulations.

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

Management is responsible for preparing the interim and annual
financial statements and financial disclosure of the Corporation and for
maintaining a system of internal controls to provide reasonable assurance that
assets are safeguarded and that transactions are authorized, executed, recorded
and reported properly.  The Committee’s role is to provide meaningful and
effective oversight and counsel to management without assuming responsibility
for management’s day-to-day duties.

The Committee will also perform the functions of the Qualified
Legal Compliance Committee (the “QLCC”) of the Board of the Corporation and in
this role will: (i) receive, review and take appropriate action with respect to
any report made or referred to the Committee by a counsel or the chief legal
officer, of evidence 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 (in this charter a “material violation”) and (ii) otherwise
fulfill the responsibilities of a qualified legal compliance committee pursuant
to Section 307 of the Sarbanes Oxley Act of 2002 and the rules promulgated
thereunder.

C.

Duties and Responsibilities of the Committee

The Committee shall have the following specific duties and
responsibilities:

1.

Audit
and Financial Matters:

The
Committee shall:

(a)

have direct responsibility for the appointment, compensation,
retention and oversight of the external auditors, and in doing so, 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;





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A-4



(ii)

review
and approve the basis and amount of the external auditors’ fees;

(iii)

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, on a
periodic basis, 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;

(iv)

resolve disagreements between management and the external auditors
regarding financial reporting;

(v)

pre-approve audit services (including comfort letters provided in
underwritten transactions) and non-audit services provided by the external
auditors;

(vi)

inform the external auditors and management that the external
auditors shall have access directly to the Committee at all times, as well as
the Committee to the external auditors; and

(vii)

instruct the external auditors that they are ultimately
accountable to the Committee as representatives of the shareholders of the
Corporation, and that the Committee is directly responsible for the selection
(subject to the approval of shareholders of the Corporation), evaluation and
termination of the external auditors of the Corporation;

(b)

review with management and the Corporation’s external auditors the
Corporation’s financial reporting in connection with the annual audit and the
preparation of the financial statements, including, without limitation, the
annual audit plan of the external auditors, the judgment of the external
auditors as to the quality, not just the acceptability of, and the
appropriateness of the Corporation’s accounting principles as applied in its
financial reporting and the degree of aggressiveness or conservatism of the
Corporation’s accounting principles and underlying estimates;

(c)

review
with management and the external auditors all financial statements and financial
disclosure which require approval by the Board of Directors.  Such review
shall include:

(i)

the Corporation’s annual financial statements including the notes
thereto and “Management’s Discussion and Analysis”;

(ii)

any report or opinion to be rendered in connection therewith;

(iii)

the cooperation which the external auditors received during the
course of their review and their access to all records, data and information
which they requested;





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A-5



(iv)

any significant transactions which were not a normal part of the
Corporation’s business;

(v)

management’s process for formulating sensitive accounting
estimates and the reasonableness of the estimates;

(vi)

any change in accounting principles and their applicability to the
business;

(vii)

all significant adjustments proposed by the external auditors;
and

(viii)

satisfying 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 the Corporation’s interim financial results, including the
notes thereto and “Management’s Discussion and Analysis” with management and the
external auditors and approve the release thereof by management;

(e)

review annually the approach taken by management in the
preparation of earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies;

(f)

at least annually, obtain and review a report by the external
auditors describing 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  or by any inquiry or investigation by
governmental or professional authorities within the preceding five years
respecting one or more independent audits carried out by the external auditors
and any steps taken to deal with any such issues and all relationships between
the external auditors and the Corporation;

(g)

review with senior management, 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;

(h)

review at least annually 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 financial statements of the
business;

(i)

discuss with management the Corporation’s policies and procedures
for identifying and managing the principal financial risks of its business
(other than risks assumed directly by the Board or one of its other committees),
to determine that management has implemented and is maintaining systems and
procedures to manage or mitigate those risks, including programs of insurance
and risk reduction;

(j)

review the audit plans of the internal and external auditors of
the Corporation including the degree of detail of those plans and the
coordination between those plans;

(k)

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;





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A-6



(l)

review management’s plans regarding any changes in accounting
practices or policies and the financial impact thereof;

(m)

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;

(n)

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 matters may be, or
have been, disclosed in the financial statements;

(o)

review with management 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;

(p)

review annually the internal audit department charter, review with
the internal auditors the Corporation’s internal control procedures, the scope
and plans for the work of the internal audit group, the annual checklist of
responsibilities of the Committee, as prepared by the internal auditors; review
the adequacy of resources and ensure that the internal auditors have
unrestricted access to all functions, records, property and personnel of the
Corporation and inform the internal auditors and management that the internal
auditors shall have unfettered access directly to the Committee at all times, as
well as the Committee to the internal auditors;

(q)

at least annually, meet separately with management, the external
auditors and internal auditors to review issues and matters of concern
respecting audits and financial reporting;

(r)

review the annual audit of expense accounts and perquisites of the
Directors, the CEO and his direct reports, including the use of the
Corporation’s assets; as well as the Corporation’s annual sponsorship, donations
and political contributions;

(s)

review
incidents or alleged incidents of fraud, illegal acts and conflicts of
interest;

(t)

review the Corporate Code of Conduct and inquire of management as
to policies and practices in place to ensure compliance and inquire of the
internal and external auditors as to any instances of deviation from the
Corporate Code of Conduct which have come to their attention, and the action
taken as a result of same;

(u)

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;

(v)

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 issue regarding the
Corporation’s financial statements or accounting policies; and





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A-7



(w)

annually prepare a report from the Committee to shareholders or
others, concerning the work of the Committee during that year in the discharge
of its responsibilities.

2.

Environment,
Health and Safety Matters:

The Committee shall:

(a)

review and evaluate with management whether the existing
environmental, health and safety practices and procedures of the Corporation and
its subsidiaries comply with applicable legislation, and conform with industry
standards, to prevent or mitigate losses;

(b)

review with the management whether the Corporation’s environment,
health and safety policies (or those of its subsidiaries) are being effectively
implemented;

(c)

review the effectiveness of the response by the Corporation or its
subsidiaries, as the case may be, to environment, health and safety issues,
including the compliance with statutory and regulatory requirements;

(d)

review and consider reports and recommendations issued by the
Corporation and its subsidiaries or by an external party relating to the
environment, health and safety issues, together with management’s response
thereto;

(e)

review with management and make recommendations to the Board of
Directors as appropriate on the Corporation’s environment, health and safety
policies and procedures and any other matters relating to the environment,
health and safety it considers relevant; and

(f)

at least annually, meet separately with the senior environment
member of management to review environmental matters that may have a material
impact on the Corporation’s business or financial results and report to the
Board thereon.

3.

QLCC
Matters:

The
Committee shall:

(a)

inform the chief legal officer and chief executive officer of any
report of evidence 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;

(b)

determine whether an investigation is necessary regarding any such
report;

(c)

if the Committee has determined that an investigation is
necessary, the Committee shall:  (i) notify the Board, (ii) initiate an
investigation to be conducted either by the Corporation’s chief legal officer or
by an outside counsel retained by the Committee and (iii) retain such additional
expert personnel as the Committee deems necessary;

(d)

at the conclusion of an investigation, the Committee shall: (i)
recommend, by majority vote, that the Corporation implement an appropriate
response and (ii) inform the chief legal officer, the chief executive officer
and the Board of the results of the investigation and the appropriate remedial
measures that it recommends to be adopted;





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A-8



(e)

have the authority and responsibility to act, by majority vote, to
take all other appropriate action, including the authority to notify, where
required, those securities commissions or the U.S. Securities and Exchange
Commission having jurisdiction, in the event that the Corporation fails in any
material respect to implement an appropriate response that the Committee has
recommended to the Corporation;

(f)

adopt
written procedures for the confidential receipt, retention and consideration of
any oral or written reports received by the Committee;

(g)

report
to the Board on a regular basis regarding QLCC matters that it deals with;

(h)

take
appropriate measures so that, to the maximum extent possible, consistent with
its obligations, the Corporation’s legal privileges are protected in connection
with the Committee’s activities; and

(i)

maintain
confidentiality in its activities to the maximum extent possible consistent with
performing a full and fair investigation.

4.

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 and in such matters shall have the
authority to retain such counsel, experts or other advisors (financial or
otherwise) as it may determine are necessary or appropriate.