In the report, S&P notes that TransAlta’s investment grade credit rating is supported by a strong business risk profile due in large part to the contracted cash flow from its Alberta generation fleet. However, S&P notes that while “Stable cash flow from long-term contracts should not change significantly in the next two-to-three years … we classify cash flow derived from contracts with less than five years to maturity as merchant.”

While Luminus Group does not endorse S&P’s methodology, it believes that the implications for TransAlta’s business are clear. Absent extension of the Alberta power purchase agreements, TransAlta will not be able to retain its investment grade credit rating. In fact, Moody’s Investors Service published a similar viewpoint in its December 18, 2007 Credit Opinion of TransAlta when it stated, “Moody's expects that [the expiration of the Alberta PPA’s and long-term contracts] will result in negative pressure on TA's rating in the medium-term.” Luminus Group believes that TransAlta should prepare for the eventuality of a downgrade to below investment grade to insure that, when it comes, such an event does not catch the company unprepared and threaten its business.

Luminus Group also believes that TransAlta’s best long-term investment is in its own business, and that a share repurchase currently represents the best use of capital for creating long-term shareholder value. As discussed in “An Operator’s Guide to Unlocking Value at TransAlta” additional leverage is only one of many alternatives available to TransAlta to fund share buybacks. A large share buyback would allow shareholders who do not recognize this long-term value to sell their stock and shareholders, like Luminus Group, who are willing to wait for the ultimate realization of this value to derive a greater share of the benefit. However, TransAlta’s strict continued insistence on maintaining an investment grade credit rating in the face of an inevitable downgrade limits much of its strategic flexibility and creates significant risks to shareholder value.

Paul Segal, President of Luminus Management, commented: “It’s not enough for TransAlta to say we pay a dividend and we are investment grade therefore we have a low risk business model. TransAlta faces many challenges - including rapidly increasing construction costs - yet also has opportunities it needs to capitalize on, such as increasing power prices in its core power markets. Shareholders need a board that is realistic about the future, will address business risk proactively and will seek at every step to maximize long-term shareholder value.”

Luminus Group is the beneficial holder of approximately 8% of TransAlta’s shares and has put forth various shareholder proposals for inclusion in TransAlta’s Management Proxy Circular for the 2008 Annual and Special Meeting of Shareholders to be held on April 22, 2008, including a proposal that reserves Luminus Group’s right to nominate directors for election at that meeting. Luminus Group intends to announce its director nominees shortly. The record date for the Annual and Special Meeting is February 25, 2008. For more information, please visit www.ImproveTransAlta.com.

About the Luminus Group:

Luminus Management

Founded in 2002, Luminus Management is the Investment Advisor to two investment partnerships – Luminus Energy Partners Master Fund, Ltd. and Luminus Asset Partners, LP. Luminus Management focuses primarily on investing in independent power and utility securities. The investment partnerships to which Luminus Management is Investment Advisor have approximately $1.4 billion of equity under management.

LS Power

Founded in 1990, LS Power is a fully integrated development, investment and asset management group with a proven track record of successful development activities, operations management and commercial contract origination and optimization. As a developer, LS Power has successfully developed gas-fired facilities and coal-fired facilities representing over 7,000 MW of total capacity, and is currently developing more than 6,000 MW of coal, natural gas and renewable power generation facilities. LS Power currently owns and manages three natural gas-fired power generation facilities representing approximately 1,765 MW. LS Power has purchased eighteen power generation projects with approximately 11,800 MW of generation capacity and manages two investment funds with approximately $4.3 billion of committed equity capital.