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TransAlta Corporation (NYSE:TAC)

Annual General Meeting Call

April 26, 2012 1:00 PM ET

Executives

Gordon Giffin – Partner, McKenna Long & Aldridge

Dawn Farrell – President and CEO

Analysts

Sandra Evans [ph]

Todd Stack [ph]

Jennifer Pierce [ph]

David Akash [ph]

Martin Rich [ph]

Diane [ph]

Dean Lucich [ph]

Parvez Mohammed [ph]

Myles Schroder [ph]

William Bacolod [ph]

Andrea Beck [ph]

Gordon Giffin

Good morning. The appointed hour of 11 a.m. having arrived, we will begin the meeting. Welcome to all of you on behalf of the TransAlta board of directors. It is certainly my privilege to welcome you to this annual meeting of the shareholders of TransAlta Corporation.

The board and management very much appreciate you, our shareholders, taking your time to be here today. My name is Gordon Giffin, and I am chair of the board of TransAlta, and I will chair this meeting, this morning. Our vice president and corporate secretary, Marie [ph] will act as Secretary of the meeting, and she is on the far left of the table.

I’m also pleased to introduce and present to you our president and chief executive officer, Dawn Farrell, who is also seated upfront with us. This meeting will also be web cast live, and we welcome those who are joining us on the internet. We also welcome those of you who may be with us today, who are not shareholders, but I remind you that only shareholders or proxy holders are entitled to vote or to actively take part in the business of this meeting.

We will first conduct the formal business of the meeting, and then at the conclusion of the formal business I will make some brief remarks on behalf of the board. And then our CEO, Mr. Farrell, will then address you to discuss in more detail TransAlta’s performance in 2011, and our strategy for the future.

There will be time for questions and answers following the remarks. Before I begin the formal part of the meeting, I want to ensure that everyone recognizes that there are exits at the rear of the room. And in the case of a disruption of power, it won’t be TransAlta’s fault, but lights will still be illumination, so you will be able to find your way, the exit light will remain on and I suspect that this is the way you came in, so you may have a sense of how to get out.

By now formally call this annual meeting of shareholders for TransAlta Corporation to order. We will first go through the formal parts of the meeting. This is Ms. Sandra Evans [ph], and Mr. Michael Marasco [ph], of CIBC Mellon Trust, our transfer agent, are in attendance today, and I appoint them to act as scrutineers for this meeting.

I ask Ms. Sandra to file a copy of the notice of this meeting, which was mailed on March 23, 2012, to shareholders of record at the close of business on March 1, 2012. A copy of the notice and proof of service will be filed with the records of this meeting. The scrutineers have provided me with a preliminary report on the attendance and it appears that 1347 shareholders are present at this meeting in person or by proxy, representing 64,383,589 common shares of the company.

Accordingly 28.7% of the common shares outstanding are currently represented at this meeting. It therefore declare that a quorum is present, and that this meeting is properly constituted for the transaction of business. A copy of the scrutineers’ report will be filed with the records of this meeting. In order to move the meeting smoothly, employees who are shareholders or proxy holders will move second motions to be put before the meeting.

I now declare that the minutes of the last annual meeting of shareholders, which was held on April 28, 2011, have been verified and signed, and are filed with the corporation’s minute book. Anyone wishing a copy of those minutes may pick one up from the table located in the lobby, outside this room.

The next item of business is the receipt of the annual consolidated financial statements of the corporation, and the auditor’s report for the year ended December 31 2011. The annual consolidated financial statements of the corporation and auditor’s report contained on pages 69 through 149 of our annual report were mailed to shareholders in accordance with the securities law of requirements, together with a notice of this meeting.

Copies are available again on the table in the lobby outside this meeting, and I request the secretary to file a copy of the annual report with the minutes of this meeting. Mr. Ryan McDonald, a representative of Ernst & Young, the auditors of the corporation is available to answer questions during the general question periods if you have any.

The next item of business is the election of directors. The board has set the number of directors to be elected at this meeting at 11. We are satisfied this number of directors is appropriate to provide us a significant range and depth of expertise and to meet all corporate governance requirements. I would like to briefly introduce the directors standing for election to the board, and ask each to stand when I call their name.

William D. Anderson. Bill is a resident of Toronto and has been a director since 2003. He was president of BCE Ventures, and prior to that was chief financial officer of BCE. He has extensive financial experience and has been involved in the management and execution of numerous corporate transactions. He is a chartered accountant and a member of the Institute of Chartered Accounts of Ontario, and Bill chairs the audit and risk committee of the board.

Stephen L. Baum. Steve is a resident of Exeter, New Hampshire, and has been a director since 2008. He was chairman and CEO of Sempra Energy for 10 years, and prior to that held several senior positions, including general counsel for the San Diego Gas and Electric Company. Steve is a member of the audit and risk committee.

Timothy W. Faithfull. Tim is a resident of Oxford, England, and has been a director since 2003. He is a 36 veteran of Royal Dutch Shell, and was formerly president and CEO of Shell Canada. He also directed the global crude oil trading operation of Shell International Trading and Shipping Company. Tim is chair of the human resources committee.

Dawn Farrell. Dawn is our president and chief executive officer, a resident of Calgary, and was appointed to the board in January 2012. Prior to her appointment as CEO, Dawn was our chief operating officer. She has over 25 years experience in the power industry.

C. Kent Jespersen, Kent also a resident of Calgary, has been a director since 2004. He was chair and CEO of La Jolla Resources International Ltd. He has also held senior executive positions with NOVA Corporation, Foothills Pipe Lines Ltd., and Husky Oil. Kent is a member of our human resources committee.

Michael Kanovsky, Michael a resident of Calgary, has been a director since 2004. He is a professional engineer and an independent businessman. Michael has extensive business experience in the development and growth of companies in the energy sector. Michael is chair of our governance and environment committee.

Gordon S. Lackenbauer, Gord a resident of Calgary, has been a director since 2005. Prior to joining the board he was deputy chairman of BMO Nesbitt Burns. Gord is a member of our audit and risk committee and also governance and environment committee.

Karen E. Maidment. Karen is a resident of Cambridge Ontario, and has been a director since 2010. She was chief financial officer and chief administrative officer of BMO Financial Group for approximately 10 years. Prior to that she held several executive positions with Clarica Life Insurance Company. Karen is a member of the audit and risk committee, as well as the governance and environment committee.

Yakout Mansour. Yakout is a resident of El Dorado Hills California, and has been a director since 2011. Yakout is a professional engineer and has recently retired from his position as President and CEO of the California Independent System Operator Corporation, a position he held since 2005. Prior to that he held several executive positions in the power industry. Yakout is a member of the human resources committee.

Dr. Martha C. Piper. Martha is a resident of Vancouver, and has been a director since 2006. Prior to joining the board she was president and vice chancellor of the University of British Colombia, and prior to that vice president, research, at the University of Alberta. Martha is a member of the governance and environment committee and human resources committee.

Finally, myself, Gordon Giffin, I am a resident of Atlanta, Georgia and have been a director since 2002. I’m a partner with the law firm of McKenna Long & Aldridge. There my practice focuses on energy and regulatory law. I served as US Ambassador to Canada from 1997 to 2001.

These are the individuals who are standing for and have been proposed by the board for election at this meeting. I would now like to ask the nominations of directors to serve for the following year.

Todd Stack

My name is Todd Stack [ph]. I’m a shareholder and I nominate William D. Anderson, Stephen L. Baum, Timothy W. Faithfull, Dawn L. Farrell, C. Kent Jespersen, Michael M. Kanovsky, Gordon S. Lackenbauer, Karen E. Maidment, Yakout Mansour, Dr. Martha C. Piper, and Gordon D. Giffin to be elected as directors of the corporation to hold office until the next annual meeting of shareholders, or until the successors are elected or appointed.

Gordon Giffin

Thank you Todd. Are there any further nominations?

Hearing none I declare the nominations closed. Since the number of nominees does not exceed the number of directors to be elected by the shareholders, I request the motion that the nominees be elected as directors of corporation to hold office until the next annual meeting of shareholders, or until their successors are elected or appointed.

Jennifer Pierce

My name is Jennifer Pierce [ph]. I’m a shareholder and nice to move [ph].

David Akash

David Akash [ph], I am a shareholder and I second the motion.

Gordon Giffin

Thank you Jennifer and David. All in favor of the motion, please signify by raising your hand. Any opposed? Thank you. I declare the motion carried.

The next item of business is the appointment of auditors. I request a motion that Ernst & Young LLC be appointed auditors of the corporation to hold office until the close of the next annual meeting of shareholders. As such remuneration as shall be fixed by the board of directors.

Martin Rich

My name is Martin Rich [ph]. I’m a shareholder, and nice to move.

Diane

My name is Diane [ph]. I’m a shareholder and I shall second the motion.

Gordon Giffin

Thank you Martin and Diane. All in favor of the resolution to appoint the auditors. Any opposed? Thank you. I declare the motion carried.

The next item of business is the consideration and approval on an advisory basis of a resolution approving TransAlta’s approach on executive compensation. The text of this resolution is specifically set out in the March 9, 2012, management proxy circular, which was mailed to the shareholders as described earlier. Since your vote is advisory, the results are not binding on the board of directors. The board and the human resources committee will certainly consider the outcome of the board as part of its ongoing review of executive compensation.

The results of the shareholder advisory vote will be included on the company’s report on voting results when it is filed with the securities regulators. I request a motion that the resolution to accept the company’s approach to executive compensation as set out in the March 9, 2012 management proxy circular, be approved on an advisory basis.

Dean Lucich

My name is Dean Lucich [ph]. I’m a shareholder, and nice to move.

Parvez Mohammed

My name is Parvez Mohammed [ph]. I’m a shareholder and I second the motion.

Gordon Giffin

Thank you Dean and Parvez. Under the rules we will conduct a vote by ballot on this resolution.

Ms. Sandra, would you please explain the voting procedure.

Sandra Evans

Good morning. If you are already voted by proxy, your vote has already been registered. And if you filled out a yellow ballot on your way into the meeting this morning, also your vote has been registered. If you wish, however, to change your vote, please raise your hand and the scrutineers will come and give you a new ballot for you to vote. Thank you.

I should have mentioned also if someone hadn’t voted, with their ballot, and they still had it, they can hand it to the scrutineers now too. Thank you.

Gordon Giffin

Any other ballots to be collected? Thank you. Okay, it should take the scrutineers a moment to complete their tally of the votes on executive compensation, and as soon as I have the results of that vote, I will provide that information to you and then we will move towards the completion of the formal part of the meeting.

Thank you. The final tally indicates that 92% of the shareholders voting voted in favor of the resolution, and I have been given the final attendance numbers at the meeting indicating that we have 1349 common shareholders present in person or by proxy, representing 64,386,893 common shares, which is 28.7% of the outstanding shares of the company.

With that, I now declare the formal business of the meeting at an end. As I suggested at the outset, I will now make a few remarks on behalf of the board, followed by more detailed remarks from our CEO, which will then be followed by the opportunity for shareholders and proxy holders to ask questions.

As I said earlier, it is a privilege for me to welcome you here today on behalf of the TransAlta board of directors. It seems like the past 12 months since we last met, have flown by. Together we are here again to report to our shareholders on the past performance of the company, but also and more importantly on our vision for the company’s future.

2011 was quite an eventful year for the leadership team in TransAlta, a year in which natural gas prices plummeted with the corresponding dampening of power prices. These economic factors, together with operational issues, such as the declaration of destruction of our Sundance 1 and II units. Required a focused and dedicated effort by our management team throughout the year.

While our financial results as a consequence were not what we had hoped in 2011, the board believes that through the leadership of Steve Snyder and Dawn Farrell, the company performance was commendable under very difficult circumstances.

We are however committed to ensure that in this instance the past is history, and not prologue. The most important responsibility of your board, the most important responsibility that we undertook in the past year, was to administer the process of transitioning the CEO role in the company. Steve Snyder, who retired at the start of this year, led TransAlta for 16 years on the path from a regulated utility to an independent generator.

He moved TransAlta towards diversification of fuels, with an emphasis on renewables, making TransAlta the leading producer of wind energy in Canada. Steve is a wonderful man, who served this company extremely well, and was a critical catalyst for the successful leadership transition that transpired.

Dawn Farrell, who is elected by the board to succeed Steve as CEO, is the right person to lead this company forward. Dawn has the experience, talent and drive to define a vision for the company’s future, and to execute on a strategy to deliver on that vision. She has a deep knowledge of TransAlta’s business, and of the broad sweep of the power generation industry.

Your board is proud of the seamless manner in which this transition has occurred, and also in the focused manner in which Dawn has defined and developed the company in this dynamic time. The board is well aware of the need for the company to manage and grow its business in a prudent yet profitable way. While the current market conditions present headwinds, we remain optimistic about the company’s future.

We take our role as stewards of prudent capital allocation, responsible cost management, strategic growth and maintenance of strong financial markets, including the integrity of your dividend very seriously. While it is clear that the immediate future presents regulatory and market challenges, we are confident that under Dawn’s leadership this management team will succeed in enhancing the growth and development of TransAlta to the benefit of our shareholders and our customers.

I would now like to pass the floor to Dawn for her remarks.

Dawn Farrell

Thank you Ambassador Giffin, and good morning to everyone, welcome. 2012 marks the beginning of TransAlta’s second century, a milestone very few companies in Canada have ever achieved. We are proud of our history, we are proud of our people, and of the role that TransAlta has played in providing electricity to many customers in the communities where we operate.

As we step forward into the next century, this management team is excited and energized by the opportunities for investment in our industry, and is well prepared to deal with the issues we face today. This team knows this business, we understand our competitive advantages. We are focused on delivering safe and affordable electricity to our customers and creating value for you, our shareholders.

So let me first start by introducing our senior team. We have their pictures and titles on the screen, and they are ready to answer your toughest questions at the reception that follows. To help you find them later, I will make quick introductions and I ask them to stand. We have Bob Emmott, Brett Gellner, Cynthia Johnston, Dawn de Lima, Hugo Shaw, Ken Stickland, Paul Taylor and Rob Schaefer. This is your team.

So let me now start by outlining our value proposition. When you invest in TransAlta, you own the promise of returns from more than 8300 MW of electricity generation across Canada, the western United States and Western Australia. You want a stake in Canada’s largest renewable energy company with over 2000 MW in wind and hydro. You own the largest and lowest cost generator in Alberta, in an economy that is both prosperous and growing.

In addition, you benefit from our diversity of assets and expertise across five fuel sources, coal, gas, geothermal, wind and hydro. You count on us to maintain high availability and productivity across our fleet, so we can generate cash to be used for the balance sheet growth, or returned back to you, all while maintaining our commitment to TransAlta’s investment grade credit rating. But that is not all.

You invest in a team of energy marketing and training specialists that over the past 10 years generated in average of $60 million in gross margin per year. And finally, you are investing in a team with a proven track record of developing new generation assets in markets and technologies that we all know well.

So with that as the background, how did we do with your investment in 2011. First, we executed on our growth strategy. We started up our 19 MW Bone Creek hydro facility in British Columbia, and our Keephills 3 450 MW unit, coal unit, that we own 50:50 Capital Power, here in Alberta.

Since 2005, our team has brought over 1600 MW of capacity on line with an investment of over $4 billion. In 2011, we also broke ground on a new wind farm that is currently being built in New Richmond [ph], and we made considerable progress on Sundance 7, an 800 MW gas-fired plant in central Alberta that we expect to begin construction on and to have commercial operation sometime in 2016.

So turning to operation, in 2011 we delivered strong availability across the fleet with exceptional performance at many of our Alberta coal facilities, notably Sundance units 3, 4 and 5 and Keephills unit I and 2, and our energy marketing business had its best year ever, earning gross margins of $137 million, and doing so within the established and conservative risk parameters.

We were not pleased, however, with the performance of Sundance 6, where an otherwise planned outage started sooner than expected due to a transformer fire, and then took longer than we wanted. This reduced cash to the business as unexpected, unplanned outage at [inaudible]. Despite this, funds from operations, which is another way of saying cash flow increased to $809 million in 2011, EBITDA was up almost 13% to over 1 billion and earnings per share were up 7% over our levels in 2010.

Finally we reported an injury frequency rate of just 0.89. This is top quartile in our industry, and better than any target we could have ever set for ourselves. Safety is a core value at TransAlta, and we are all extremely proud of this accomplishment, and the credit is due to all of our employees and our contractors.

For all of these agreements, 2011 was not without its setback. Late in the year we settled the matter with Alberta surveillance administrator regarding a series of trades that we conducted in our trading business in eight days in November. We take our reputation very seriously, and have put in place a number of additional protections to address this issue, and prevent similar ones from occurring in the future.

We have also validated our approach through a third party independent audit of our compliance practices. The second major setback, of course, was the discovery of severely distressed broiler tube conditions at our Sundance units 1 and 2. We shut the units down immediately upon discovering the problem, and set about determining the cost to repair the unit and to bring them back online.

When it became clear that the cost to do so would be uneconomic for TransAlta under the current legislative power purchase arrangements, we exercised our right to make the client to terminate the contract due to economic destruction. This mechanism is contained in the PPA to address situations like this, and that claim is now the subject of an arbitration proceeding. The arbitration panel will render its decision in July.

So now let me take a moment just to talk about our first quarter results of this year, which we announced this morning. Details are available in our press release, but the bottom line for Q1 of 2012 is that we reported strong fleet availability, even though we undertook a major planned outage at Keephills 2. We also reported solid cash flow, even though this was an unseasonably warm winter in Alberta, and low gas prices kept power prices at historically low levels in our Pacific north-west markets affecting our Centralia operation.

We remain this year on track to achieve our goal of approximately 89% to 90% availability for the year, and we continue to believe that the company’s underlying fundamentals are strong. This morning we also announced that we will not proceed beyond the front end engineering and design study for project pioneer. This was a joint effort by TransAlta Corporation, Capital Power, Enbridge, and the Alberta and Canadian governments to demonstrate the commercial scale viability of carbon capture and storage or CCS technology.

This first step was an essential part of the project, and it was to prove the technical and economic feasibility of CCS before we decided to make a major capital commitment. We have concluded through the feed process that the technology works, and that the capital costs are indeed in line with our expectations. However, the market for CO2 sale and the price of emission reductions are less efficient at this time to allow the project to proceed.

So far, I talked to you today about 2011 and our first quarter. I would now like to turn and talk about the future, and there are two topics I believe of deep interest to all of us. I know they are to me, the dividend and our stock price. First, we understand shareholders are concerned about the integrity of TransAlta’s dividend. So let us talk about that. TransAlta’s dividend coverage relative to cash flow, less sustained capital, has been in the range of 55% over the last several years.

What this means is after we use the cash to reinvest in our asset, so they will run at high levels of availability over their life, we pay you a dividend, and then we still have cash leftover to support the balance sheet or grow the company. This ratio has been stable over several years. The second issue is our stock price. Our stock price is down, you know it, we know it, and none of us like that. We believe much of it is due to the recent – much of the recent decline is due to concerns with low power prices in the Pacific North West, which affects revenue for our Centralia operation, uncertainty about the Sun 1 and 2 arbitration, and apparent concerns about the sustainability of TransAlta’s dividend.

So let me address these one by one. First, beyond prices are largely beyond our control. Sometimes they are low and sometimes they are high. But people are predicting that gas prices could remain low for some time. These low gas prices drive down power prices in the Pacific north-west. So to create value for you we need a strong plan. Our plan is simple, for the Centralia plant, we must first sign longer-term contracts with local utilities, contracts that will provide stability and pricing to them, and stability and revenues for us over the life of that plant.

We are currently in discussions with customers in that market. We must also align our cost structure to address this lower price environment. Coal producers and rail companies are working with us to find a cost structure that maximizes our ability to run the plant full out over its life. Our management team and employees are identifying many ways to run the plant more efficiently.

In terms of uncertainty about the Sundance 1 and 2 arbitration, that is different. It is a one-time event of which the outcome will be known later this year. There what I can say is that we are confident in the strength of our case. In terms of the dividend, as I said earlier, the dividend is the decision of the board. This year our sustaining capital is high, a program that we have been managing and communicating to you over the past several years.

We are confident that our sustaining capital will return to more normal levels in 2013 and free up more cash for our business. So by mid-year, we will have a decision on the arbitration, we will be well on our way through this year with our major capital program, and finally we will be well down the path to adjusting to the new realities of lower power prices. So this plan addresses our key short-term issues. But what about the long-term?

Our longer-term plan is all about growth, and this is where it is really exciting and great to be a Canadian. The Conference Board of Canada recently estimated that over $200 billion will be invested in electricity generation infrastructure in Canada over the next 20 years and that is what we do. More than half of the investment will come from two provinces, where TransAlta is strongest, Alberta and Ontario. One only has to live in Alberta to know that our province is growing, and our power demands are increasing. This is our home market and we fully intend to serve customers with low cost, reliable electricity that has low environmental impact.

The same is true in Western Australia, where we see an opportunity to double our output. In the western United States, our ambition to grow has been delayed slightly, so we can focus our efforts there on the Centralia plant, but once that is done our team will be aggressively pursuing opportunities in that market as well.

So before I close, I would just like to take a couple of moments to reflect the values that you will be able to rely on when investing with TransAlta. Our management team is committed to investing cash only when it achieves strong returns. They are a competitive bunch of people, and they are aggressive in their search for economic opportunities to investing in our industry for you.

We have embedded the principles of environment sustainability and community consultation into our decision making. We know that transparency and two-way relationships with stakeholders and regulators will allow us to develop electricity projects, that will be supported by local communities. And we know that we need to contribute to strong corporate policy to ensure that we can meet both public and shareholder expectations for the product that we sell.

Our work to ensure that a flexible and workable CO2 emissions from coal plants is a testament to our commitment to strong public policy for electricity supply across Canada. So let me summarize my remarks for today. I bet you wish I did this at the beginning. 2011 was a strong year and difficult market conditions. 2012 is about investing in our assets and staying the course on high operational performance. We are very clear on the challenges we face with lower commodity prices, and our plan to affect the actions we need to take to ensure that strong cash and earnings are generated from our activity.

There are no silver bullets to low-power devices. But a clear strategy, hard work, and execution will overcome almost anything. Canada’s economy is on fire as they say, and TransAlta is positioned to provide the electricity needed as the economy grows. We intend to aggressively pursue growth, and invest when we find opportunities that meet our standards.

In closing, I want to thank our Chair, Ambassador Gordon Giffin, and the entire board of directors for your wise council and confidence in me and my leadership team. I would also like to thank our employees for their tremendous effort and commitment to our customers and shareholders, and I would like to thank you for coming today, for supporting us and for being here to have a dialogue about our future. And finally, I would be remiss in not thanking and giving my personal appreciation to our former CEO, Mr. Steve Snyder, for his guidance and friendship over very many years.

Thank you very much, and with that we will be pleased to take your questions.

So before you start the question and answer part of the meeting, here are a few key process points. I would ask that each person limit themselves to one question in order to provide everyone with access to the microphones, and to ask many questions. If you have more than one question, please wait your turn at the microphone to ask your next question. When asking a question, use the mike so everybody can hear. Our volunteers will get them to you, and please state your full name and whether or not you are a shareholder or proxy holders. Proxy holders should also identify the shareholders for whom they hold a proxy, and so we will take questions. So, I can say, if there is no other questions than we can close. We would love to take your questions.

Question-and-Answer Session

Dawn Farrell

Would you like us to read – you want us to read them. Okay. Yes. This is from Myles Schroder [ph], and he asked, are the windmills providing a margin of profit, and the answer is yes, and we are very pleased with our investments in our 1000 MW. We have over 1000 MW of wind. TransAlta has invested in the wind business as a very profitable part of our business, and do provide a return.

And the second question, yes, in August of 2011, Standard & Poor's have given us a triple B with negative outlook, what is your strategy to turn this rating around. And I think everything that we talked about today in terms of our three-point plan in the short term is really critical to our credit ratings. As well, as you know we have a DRIP [ph] program, and we have created a premium DRIP, which allows us to raise a little bit more equities, which does also support the credit ratings, and we’ve also done some preferred shares offerings this year, which make a difference to the credit rating. So we are very much on top of that issue, very commitment to an investment grade rating, and are taking those kinds of actions to make sure that we can stay there.

Does that answer your question? Thank you.

[inaudible]

The premium dividend. The premium DRIP program allows you to exchange your dividends for cash, and then we can convert that to equity. So it allows us to take a much higher percentage of the dividends that we pay out, and have them convert to equity. And sitting right in front of you can reach out and touch our CFO, and on the break you can have explain it to you in detail.

William Bacolod

My name is William Bacolod [ph], shareholder. I was just wondering if you could explain the Sundance issue a bit, or do we – few questions about it. Typical life expectancy of this equipment, and where are we in the process. And so from that I guess I am wondering is this a surprise to anybody or are these considered kind of freak accidents? And based on that answer, I’m curious as to if it was sort of known, or we were near the end of the life expectancy, why this is such a shock for TransCanada and for them to take this action. And then you didn’t address what happens if this goes against TransAlta and the cost to that. I read it is $100 million.

Dawn Farrell

Right. Well, first I have to start by saying that there is a lot that I cannot really say on that issue at this time. We are in an arbitration, and a number of us in this room are witnesses in that arbitration, and we have an order that doesn’t allow us to discuss too much of what is going on there because we have obtained [ph] people that are going to be on the panel next week.

So there is very little I can tell you about it. But I can just from a very general, if I can’t tell you anything about our thoughts about why people think what they do. But what I can tell you is that your first question, how long does coal plants last. They typically can last anywhere from 45, 50 years in that range. The kinds of issues that we deal within those plants are typically well-known. In this particular case, in the boilers it was corrosion fatigue that was found to be in unexpected places in the boilers.

Lucky for you, the chief engineer is sitting right ahead of you. So he can give you a lot of insight into what corrosion fatigue is, and how it is managed in the industry. We believe that we managed the issue very well, and we operated those plants well, and really the issue that came about was under the PPAs to the extent that the capital, particularly in that issue is now well beyond what the PPAs provided for during the destruction clause, and we chose to call that.

So that is where we are in it, and as we go forward over the next two months and finish that arbitration there will be a decision on it. But the technical details, I think, you can get a lot out of Bob, and now you just can’t tell anybody what he tells you.

William Bacolod

And if the decision goes against TransAlta, are those numbers accurate, and how you’re going to finance that?

Dawn Farrell

We would not speculate on that. What I can tell you is that we are very, very confident in our case, and we are confident in it, and that is all I can say for now.

Andrea Beck

Andrea Beck [ph], a shareholder. You mentioned that you are seeing profitability in wind power, how about geothermal, and do you have any other projects for geothermal?

Dawn Farrell

Yes, geothermal has also been profitable for TransAlta. The geothermal that we have is down in the Imperial [ph] Valley, and it is a good resource. There is quite a bit of additional resource, and we have been over the last several years working on a couple of projects, to see if we could bid them into California market. In just the very recent past we found that solar – the utilities are tending to want to purchase more solar and wind then they are geothermal.

But we do expect over the longer term as California goes to a higher renewable portfolio standard that geothermal will be back in the game because it is a base load. It does operate at about 82% of the time. So I think it is a bit further off than perhaps we had hoped right now. But it is still certainly something that we keep a careful eye on, and are working actively to see if we can find additional markets for it.

Okay, if there are no further questions, then I will turn the podium back over to Ambassador Giffin. Thank you.

Unidentified Participant

For our shareholders, TransAlta to 2011, I would like to know what the connection is on the high line on the American side, which is completed to Alberta [ph], correct me if I am wrong, what the connection is for TransAlta on the Canadian side on the high lives that is per post…

Dawn Farrell

Is that the – are you talking about the line coming in from Montana that are being built by Enbridge. Are you talking about the lines coming into to Montana?

Unidentified Participant

The line that is constructor to the borderline that the Montana, now Alberta for approximately a year, year and a half. What is the connection for TransAlta on the high lines to that line?

Dawn Farrell

I think just to be clear the transmission lines that are under construction through Montana is a project that is now owned by Enbridge, and it is currently under construction. When it comes into Alberta, it will connect into the Alberta system, and then it will allow power to come through the Pacific north-west markets into Alberta. In terms of how that affects TransAlta, to the extent that we wanted to buy some of that transmission and bring power in, we could if there was power for sale there. And frankly what it does is it will bring more power into southern Alberta, but that is really the – the connection to TransAlta is if we saw some opportunities bringing power up, we could utilize that line if we could get the line.

Does that answer your question? Are you looking for the specific location of the transmission connection, interconnection?

Unidentified Participant

No, it does not answer my question. If these lines are not connected, what is the advantage for the lines that is being constructed that scoots and stops dead there? What are the long-range plants in the future, as [inaudible] has been growing for the last two years. And there is high line on the Canadian side that are not constructed. Will it ever be constructed, or is this thing immobilized?

Dawn Farrell

Yes. The lines that you are talking about the lines on the US side of the border are owned by Enbridge. That is not anything to do with TransAlta. And the lines on the Canadian side are to do with AltaLink, and the Alberto ISO, and the real, the people who need to answer those questions are AltaLink and the ISO and Enbridge. So that is not our business anymore.

William Bacolod

William Bacolod again. This will be my last question, just so we can go eat. I’m just a little worried about as we all are about the stock price, and the disconnect, and I’m – maybe just me personally. I’m feeling between what I just heard and obviously what the Street is selling or believing, do you think the Street is predicting lower gas prices for longer than what may be you are, and that is why we are down another 50 points as we sit here closing in on $16.

Dawn Farrell

[inaudible] I was speaking, but…

William Bacolod

There is obviously a disconnection. I’m just wondering whether they don’t understand the story, or the story hasn’t been communicated properly, or we’re using different numbers for the future.

Dawn Farrell

I think it is just it is the usual assessment of risk around a variety of factors. Some people see it one way, and some people see it the another. I think when we think about low gas prices, for sure, there are a number of companies here in Calgary that have been hit really hard, not only by the current low gas prices, but by this assessment that these gas prices could be here for a long time, and that has taken a lot of value out of a number of companies, including ours.

I think in terms of where TransAlta is on that – I laid out my plan, and it is part of our plan, contracting Centralia, and getting our cost structure in line with the revenues there is our key response to that. But the market has to see us do that and we have to get that done. And so I think, some of what is going on right now, you know, as we get through to the rest of this year, we have to prove that our team can deliver what we said we would deliver, and I think that is where you will start to see some of that short-term pressure [ph].

But none of us really can predict what the stock market does what it does at any time. So that our best guess, that is my best guess, and we have directed our plant to try to correct for what we think is going on, but one never really knows.

Okay. Thank you.

Gordon Giffin

Thank you very much Dawn, and thank you again to all of you for attending. Thank you for investing in our company, and thank you for your time this morning. At this point, we will adjourn the meeting, and meet with you outside over refreshments.

Thank you again.

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