TransAlta to end power purchase agreement with large coal plant

TransAlta has determined that the units cannot be economically restored to service

Calgary, Alberta, February 9, 2011 — TransAlta Corp. issued notice of termination for destruction on its Sundance 1 and 2 coal-fired generation units under the terms of the Sundance A power purchase arrangement.

After extensive physical inspection of the boilers in the units and review of the terms and conditions of the PPA, TransAlta has determined that the units cannot be economically restored to service.

TransAlta expects to recover the net book value prescribed in the PPA and does not expect any material financial impact. TransAlta remains committed to continuing to work with the PPA buyer and the balancing pool under the processes established within the PPA.

TransAlta took Sundance 1 and 2 units out of service in mid-December 2010 due to testing that indicated boiler tube conditions were no longer at design limits.

Comparable boiler conditions have not been observed at TransAlta's other coal-generation units. TransAlta subsequently notified the PPA buyer and the balancing pool on January 4, 2011 of a force majeure event.

Sundance 1 and 2 comprised 560 MW of the 2,126 MW Sundance power plant, which has six individual units and serves as a baseload facility for the Alberta electricity system. Sundance is located about 70 kilometers west of Edmonton and is the largest power plant in Alberta, and the largest coal plant in Western Canada.

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