TransAlta Power, L.P.
TSX : TPW.UN

TransAlta Power, L.P.

January 27, 2006 09:01 ET

TransAlta Power, L.P. reports fourth quarter results

CALGARY, ALBERTA--(CCNMatthews - Jan. 27, 2006) - TransAlta Power, L.P. (TransAlta Power) (TSX:TPW.UN) today announced a fourth quarter net loss of ($26.5) million or ($0.36) per unit, compared to net earnings of $12.9 million or $0.18 per unit for the fourth quarter of 2004. Included in reported earnings for the fourth quarter 2005 is a $39.1 million asset impairment charge taken against the Ottawa cogeneration facility. Excluding this charge, net earnings were $12.6 million or $0.17 per unit in the quarter. Total distributions paid to unitholders in cash and units were $0.20 per unit, which is comparable to distributions paid to unitholders in the same period in 2004.

After carefully examining expected market conditions and contractual obligations with its customers, it was determined the future cash flows from the Ottawa facility are likely to be less than the book value of the asset. The main reason for the reduction in future cash flows is the expiration of the natural gas supply contract on Oct. 31, 2007. The electricity sales contract extends through to 2012 and a gas supply contract has not been secured for the period 2008 to 2012. At current forward natural gas prices, the Ottawa plant would generate cash flows less than its net book value, thereby necessitating the write down.

"We were satisfied with TransAlta Power, L.P.'s overall operating performance and cash flow during the quarter," said Ian Bourne, TransAlta Power, L.P. president and director. "We are disappointed we will not recover the carrying value of the Ottawa plant, but this will not affect cash distributions in 2006 or 2007. We will continue to review alternatives for future operations of the Ottawa plant that will maximize cash flows."

In the year ended Dec. 31, 2005, the net loss were ($2.8) million or ($0.04) per unit, compared to $33.6 million or $0.48 per unit for 2004. Excluding the impact of the asset impairment charge, net earnings were $36.3 million or $0.50 per unit for 2005. Total distributions paid in cash and units at Dec. 31, 2005 were $58.5 million ($0.80 per unit) compared to $55.9 million ($0.79 per unit) at Dec. 31, 2004.

Based upon TransAlta Power, L.P.'s current operations, it is expected approximately 65 per cent of cash distributed to unit holders in 2006 will be taxable.

TransAlta Power, L.P. owns a 49.99 per cent interest in TransAlta Cogeneration, L.P.(TA Cogen) which owns interests in five gas-fired cogeneration facilities in Ontario, Alberta and Saskatchewan and in a coal-fired, mine-mouth facility in Alberta. These facilities have a total generating capacity of 1,338 megawatts of electric power, all of which is sold under long-term contracts to high-quality counterparties.

All amounts are in millions of Canadian dollars, unless otherwise noted.



A. TransAlta Power

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------

Net earnings (loss) $ (26.5) $ 12.9 $ (2.8) $ 33.6
Cash available for
distribution(1) $ 19.4 $ 8.0 $ 58.9 $ 33.6
Total distributions
paid in cash and units $ 14.8 $ 14.3 $ 58.5 $ 55.9
------------------------------------------------------------------------
Net earnings (loss)
(per unit) $ (0.3585) $ 0.1802 $ (0.0387) $ 0.4759
Cash available for
distribution
(per unit)(1) $ 0.2618 $ 0.1117 $ 0.8058 $ 0.4759
Total distributions
paid in cash and units
(per unit) $ 0.1988 $ 0.1988 $ 0.7950 $ 0.7857
------------------------------------------------------------------------
Weighted average number
of units outstanding 74.0 71.6 73.1 70.6
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Cash available for distribution and cash available for distribution
(per unit) are not defined under GAAP. Refer to page 5 of this news
release for a reconciliation of these measures to cash provided by
operating activities.


TransAlta Power declared total distributions of $14.8 million of which unitholders reinvested $5.6 million under the Premium Distribution, Distribution Reinvestment and Optional Unit Purchase Plan (DRIP) during the fourth quarter of 2005 compared to distributions declared of $14.3 million of which $5.6 million was reinvested under the DRIP in the fourth quarter of 2004. For the twelve months ended Dec. 31, 2005, total distributions declared were $58.5 million of which unitholders reinvested distributions of $22.7 million under the DRIP compared to total distributions declared of $55.9 million of which $22.3 million was reinvested under the DRIP during the same period in 2004.



B. TA Cogen

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Net earnings (loss) $ (52.7) $ 27.1 $ (2.4) $ 69.5
Cash available for
distribution(1) $ 42.6 $ 41.6 $ 126.6 $ 118.1
Cash distributions paid $ 39.2 $ 22.1 $ 121.1 $ 72.9
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Cash available for distribution is not defined under GAAP. Refer to
page 5 of this news release for a reconciliation of this measure to
cash provided by operating activities.


Due to a change in the natural gas markets and the increasing cost of natural gas, TA Cogen reviewed the impact of the future cash flows for the Ottawa plant. These increased gas costs have lowered margins as TA Cogen does not have a gas supply contract in place for Ottawa for the period 2008 - 2012 to match the contract to provide electricity under predetermined prices to the Ontario Electriticy Financial Corporation (OEFC). Based upon the current view of gas costs and market conditions for that period and the likelihood that the plant will not operate as extensively beyond 2012 (following completion of the existing contract), a reduction in the carrying value is required and a charge of $78.3 million was recognized in the fourth quarter of 2005.

For the three months ended Dec. 31, 2005, net earnings decreased by $79.8 million compared to the same period in 2004 primarily due to the impairment charge. For the year ended Dec. 31, 2005, net earnings decreased by $71.9 million compared to last year. Increases in gross margins from a full year of production from the Meridian plant, higher prices at Sheerness and sales of gas at the Ontario plants were offset by the Ottawa impairment charge of $78.3 million.

Cash distributions paid by TA Cogen increased by $17.1 million and $48.2 million for the three and twelve months ended Dec. 31, 2005, respectively, compared to the same periods in 2004, due to the increases in gross margins described above. The increases in distributions were used by TransAlta Power to repay advances received from TA Cogen associated with the purchase of Meridian.



Availability, production and revenues

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Availability (%) 94.0 97.1 91.5 93.0
Total production (GWh) 1,472 1,461 5,693 5,284
------------------------------------------------------------------------
------------------------------------------------------------------------

Revenues
------------------------------------------------------------------------
Electrical $ 55.3 $ 41.3 $ 171.5 $ 128.4
Capacity 38.5 37.1 148.9 141.6
Thermal and other 13.9 5.7 40.6 14.4
------------------------------------------------------------------------
------------------------------------------------------------------------
Total $ 107.7 $ 84.1 $ 361.0 $ 284.4
------------------------------------------------------------------------


Plant availability for the three months ended Dec. 31, 2005 was lower than the same period in 2004 as a result of a planned outage at Fort Saskatchewan and unplanned outages at Windsor and Mississauga. For the year ended Dec. 31, 2005, availability was lower than 2004 due to planned outages at Ottawa and Fort Saskatchewan and unplanned outages at Windsor and Mississauga.

For the three months ended Dec. 31, 2005, production increased by 11 gigawatt hours (GWh) compared to 2004. The incremental production from Meridian was offset by the outages described above. For the year ended Dec. 31, 2005, production increased by 409 GWh as incremental production from Meridian more than offset the lost production at the Windsor and Mississauga plants due to higher unplanned outages, lower production at Fort Saskatchewan due to higher planned maintenance and lower customer demand and the planned outage at Ottawa.

Electrical revenues increased by $14.0 million and $43.1 million for the three and twelve months ended Dec. 31, 2005, respectively, compared to the same periods in 2004 primarily due to incremental revenue from Meridian of $12.5 million and $41.0 million.

Capacity revenues increased by $1.4 million and $7.3 million for the three and twelve months ended Dec. 31, 2005, respectively, compared to the same periods in 2004 primarily due to incremental revenue from Meridian of $1.9 million and $9.7 million partially offset by reduced capacity revenue at Sheerness.

Thermal and other revenue increased by $8.2 million and $26.2 million for the three and twelve months ended Dec. 31, 2005, respectively, compared to the same periods in 2004 due to incremental revenue from Meridian of $4.4 million and $19.0 million as well as $4.0 million and $5.7 million of revenue at Sheerness due to higher prices.



Cost of fuel

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Total cost of fuel $ 55.1 $ 33.2 $ 176.9 $ 113.8
------------------------------------------------------------------------
------------------------------------------------------------------------


Fuel costs increased by $21.9 million and $63.1 million for the three and twelve months ended Dec. 31, 2005, respectively, compared to the same periods in 2004 primarily due to incremental costs from Meridian of $18.2 million and $60.6 million.



Operating & maintenance

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Operating and
maintenance $ 8.0 $ 6.6 $ 39.0 $ 36.6
------------------------------------------------------------------------
------------------------------------------------------------------------


Operating and maintenance expense for the three months ended Dec. 31, 2005 increased by $1.4 million compared to the same period in 2004 due to incremental costs from Meridian and increased maintenance expenditures at Windsor and Ottawa. For the twelve months ended Dec. 31, 2005, operating and maintenance costs increased by $2.4 million compared to the same period in 2004 primarily due to incremental costs from Meridian of $2.1 million.



Depreciation & amortization

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Depreciation and
amortization $ 18.0 $ 16.4 $ 65.3 $ 61.3
Asset impairment charge 78.3 - 78.3 -
------------------------------------------------------------------------
Total depreciation
and amortization $ 96.3 $ 16.4 $ 143.6 $ 61.3
------------------------------------------------------------------------
------------------------------------------------------------------------


Depreciation expense increased by $1.6 million and by $4.0 million for the three and twelve months ended Dec. 31, 2005, respectively, over the same periods in 2004. The increase was primarily due to the incremental depreciation from the addition of the Meridian plant of $0.9 million and $4.2 million. The asset impairment charge relates to the reduction in carrying value of the Ottawa facility.



Interest expense

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Interest expense $ 0.9 $ 0.9 $ 3.9 $ 3.2
------------------------------------------------------------------------
------------------------------------------------------------------------


Interest expense for the twelve months ended Dec. 31, 2005 was slightly higher than the same period in 2004 due to interest incurred on advances from TransAlta Energy Corporation (TEC) related to the acquisition of Meridian.

OUTLOOK

The key factors affecting TA Cogen's financial results for 2006 are the megawatt capacity in place, the availability of and production from generating assets, the costs of production and the margins applicable to non-contracted production. As such, these key factors may also affect TransAlta Power's financial results.

Availability, production and revenue

Availability for 2006 is expected to be higher than 2005 primarily due to reduced planned maintenance at Sheerness and at the gas facilities.

Production for 2006 is expected to be comparable to 2005 as increased production at Sheerness from lower planned maintenance will be offset by planned curtailments at the Ottawa plant to take advantage of opportunities to sell gas. Contracts to sell the gas, which will result in higher net cash flow, were completed during the fourth quarter.

Electricity spot prices for 2006 in Alberta are expected to be comparable to those experienced in 2005. Natural gas pricing, which impacts the price of electricity, is expected to remain strong with downward pressure likely to occur once the current heating season comes to a close, leaving average 2006 gas prices similar to those experienced in 2005. The exposure of Sheerness to volatility in Alberta electricity prices is substantially mitigated through the Power Purchase Arrangement (PPA) as a significant portion of production is contracted based on achieving specified availability targets.

Capacity payments at Sheerness will be slightly lower due to the effect of long-term interest rates on the PPA pricing formula.

Fuel costs

Coal costs for 2006 are expected to be higher than 2005 due to higher production at Sheerness and escalation in the coal supply contract. Gas commodity prices for the Ontario plants are expected to increase in 2006 compared to 2005 due to the escalation provisions in the gas supply contracts and the termination of a gas swap agreement with TEC at the end of 2005. The majority of transportation costs for the Ottawa and Mississauga plants are fixed under the transportation swap agreement with TEC. Transportation costs for Windsor are regulated tolls and are not expected to change significantly for the majority of 2006. The Fort Saskatchewan and Meridian plants have limited exposure to movements in gas commodity or transportation costs as their respective customer supplies all gas necessary for use in these plants.

Capital expenditures

Capital expenditures for 2006 are expected to be $20 million to $25 million, the majority of which are for planned maintenance at the gas plants. Capital expenditures will return to $5 million to $10 million per year for 2007 and 2008.

Distributions

From the inception of TransAlta Power in 1998 to the end of 2003, cash distributions had been fully tax-deferred. Unitholders are not required to pay income tax in the year of receipt on the distributions that are tax-deferred. Based upon TransAlta Power's current operations, it is estimated that 65 per cent of the 2005 and 2006 cash distributions will be taxable.

TA Cogen continues to pursue alternatives for future operations of the Ontario plants, including contract renegotiations and alternative uses of the plants. TA Cogen currently has contracts in place to increase cash flows in 2006 and 2007 compared to 2005 by curtailing electricity production and selling natural gas.

NON-GAAP MEASURES

TransAlta Power and TA Cogen evaluate their performance and the performance of its plants using a variety of measures. These measures discussed below are not defined under Generally Accepted Accounting Principles (GAAP) and therefore should not be considered in isolation or as alternative to, or more meaningful than, net earnings or cash flow from operations as determined in accordance with GAAP as an indicator of TransAlta Power or TA Cogen's financial performance or liquidity. These measures are not necessarily comparable to a similarly titled measure of another company.

Cash available for distribution and cash available for distribution (per unit) are a measure of TransAlta Power's ability to make distributions to unitholders based on operating results; however, it is not defined under GAAP and it should not be considered an alternative to, or more meaningful than, net earnings or cash flow as determined in accordance with GAAP as an indicator of TransAlta Power's performance or liquidity.



TransAlta Power

A reconciliation of cash provided by operating activities to cash
available for distribution is as follows:

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Cash provided by
operating activities $ - $ (1.0) $ (1.3) $ (1.4)
Change in non-cash
working capital
balances (0.2) 0.3 (0.3) 0.3
Purchase of TA Cogen
units - (30.0) - (30.0)
Advance from TA Cogen - 27.6 - 28.0
Net proceeds from
issuance of partnership
units - - - 56.7
Redemption of partnership
units - - - (56.4)
Distributions received
from TA Cogen 19.6 11.1 60.5 36.4
------------------------------------------------------------------------
Cash available for
distribution $ 19.4 $ 8.0 $ 58.9 $ 33.6
------------------------------------------------------------------------
------------------------------------------------------------------------


TA Cogen

A reconciliation of cash provided by operating activities to cash
available for distribution is as follows:

3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Cash provided by
operating activities $ 19.1 $ 38.5 $ 129.0 $ 129.1
Changes in non-cash
working capital balances 25.0 5.6 14.3 4.0
Levelization repayment
to TEC (0.3) (0.1) (1.0) (0.5)
Repayment of long-term
debt principal (1.0) (0.9) (3.9) (3.7)
Capital including
maintenance
expenditures,
net of recoveries (0.2) (1.5) (11.8) (10.8)
Cash available for
distribution $ 42.6 $ 41.6 $ 126.6 $ 118.1
------------------------------------------------------------------------
------------------------------------------------------------------------


TRANSALTA POWER, L.P.
FINANCIAL STATEMENTS

Balance Sheets
(in thousands of dollars)

Dec. 31, Dec. 31,
Unaudited 2005 2004
------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 108 $ 58
Distribution receivable from
TransAlta Cogeneration, L.P. 8,742 9,880
Accounts receivable - 251
------------------------------------------------------------------------
8,850 10,189
Investment in TransAlta Cogeneration, L.P. 528,073 588,668
------------------------------------------------------------------------
Total assets $ 536,923 $ 598,857
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND PARTNERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 78 $ 15
Advances from TransAlta Cogeneration, L.P. 4,316 28,045
Distribution payable 9,841 9,512
------------------------------------------------------------------------
14,235 37,572
Partners' equity
Partnership units 678,482 655,779
Contributed surplus 381 381
Deficit (156,175) (94,875)
------------------------------------------------------------------------
522,688 561,285
------------------------------------------------------------------------
Total liabilities and partners' equity $ 536,923 $ 598,857
------------------------------------------------------------------------
------------------------------------------------------------------------


Statement of Partners' Equity
(in thousands of dollars except number of units outstanding)

Number of units General Limited
Unaudited outstanding partner partners Total
------------------------------------------------------------------------
Balance, Dec. 31, 2004 71,987,683 (10) 561,295 561,285
Partnership units issued
under DRIP 2,479,132 - 22,703 22,703
Net earnings - - (2,830) (2,830)
Distribution declared - (6) (58,463) (58,469)
------------------------------------------------------------------------
Balance, Dec. 31, 2005 74,466,815 (16) 522,705 522,689
------------------------------------------------------------------------
------------------------------------------------------------------------


Statements of Earnings (Loss) and Deficit
(in thousands of dollars except per unit amounts)

Unaudited 3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Revenues
Equity earnings
from TransAlta
Cogeneration, L.P. $ (26,351) $ 13,540 $ (1,211) $ 34,720
Expenses
Management and
administration 73 534 872 1,011
Net interest expense 122 101 748 101
------------------------------------------------------------------------
195 635 1,620 1,112
------------------------------------------------------------------------
Net earnings (loss) $ (26,546) $ 12,905 $ (2,831) $ 33,608
------------------------------------------------------------------------
------------------------------------------------------------------------

Net earnings (loss)
per unit
(basic and diluted) $ (0.36) $ 0.18 $ (0.04) $ 0.48
------------------------------------------------------------------------
------------------------------------------------------------------------

Weighted average number
of units outstanding
(basic and diluted) 74,044 71,573 73,132 70,648
------------------------------------------------------------------------
Deficit, beginning
of period $(114,828) $ (93,470) $ (94,875) $ (72,553)
Net earnings (loss) (26,546) 12,905 (2,831) 33,608
Distributions declared $ (14,801) $ (14,310) $ (58,469) $ (55,930)
------------------------------------------------------------------------
Deficit, end of period $(156,175) $ (94,875) $(156,175) $ (94,875)
------------------------------------------------------------------------
------------------------------------------------------------------------


Statements of Cash Flows
(in thousands of dollars)

Unaudited 3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Operating activities
Net earnings (loss) $ (26,546) $ 12,905 $ (2,831) $ 33,608
Equity (earnings) loss
from TransAlta
Cogeneration, L.P. 26,351 (13,540) 1,211 (34,720)
Change in non-cash
operating working
capital balances 152 (331) 315 (261)
------------------------------------------------------------------------
Cash used in
operating activities (43) (966) (1,305) (1,373)
------------------------------------------------------------------------
Investing activities
Investment in TransAlta
Cogeneration, L.P. - (30,000) - (30,000)
Distributions received
from TransAlta
Cogeneration, L.P. 19,573 11,051 60,522 36,427
------------------------------------------------------------------------
Cash provided by (used in)
investing activities 19,573 (18,949) 60,522 6,427
------------------------------------------------------------------------
Financing activities
Net proceeds from issuance
of partnership units 10 - 30 56,657
Redemption of partnership
units - - - (56,412)
Advances from
(repayment to)
TransAlta
Cogeneration, L.P. (10,507) 27,624 (23,729) 28,045
Distributions paid
to unitholders
(net of DRIP) (9,095) (8,489) (35,468) (33,468)
------------------------------------------------------------------------
Cash provided by
(used in)
financing activities (19,592) 19,135 (59,167) (5,178)
------------------------------------------------------------------------
Increase (decrease)
in cash (62) (780) 50 (124)
Cash, beginning of period 170 838 58 182
------------------------------------------------------------------------
Cash, end of period $ 108 $ 58 $ 108 $ 58
------------------------------------------------------------------------
------------------------------------------------------------------------


TRANSALTA COGENERATION, L.P.
FINANCIAL STATEMENTS

Consolidated Balance Sheets
(in thousands of dollars)

Dec. 31, Dec. 31,
Unaudited 2005 2004
------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 3,122 $ 1,276
Accounts receivable 55,246 33,133
Advances to TransAlta Power, L.P. 4,316 28,045
Prepaid expenses 802 388
------------------------------------------------------------------------
Inventory 3,155 4,447
------------------------------------------------------------------------
66,641 67,289
------------------------------------------------------------------------
Power plants, net 1,184,668 1,316,784
Long term receivable - 828
------------------------------------------------------------------------
Total assets $ 1,251,309 $ 1,384,901
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND PARTNERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 36,126 $ 22,584
Distributions payable 17,488 19,764
Advances from related parties 11,885 24,968
Current portion of long-term debt 4,223 3,926
------------------------------------------------------------------------
69,723 71,242
Advances from related party 4,057 5,525
Long-term debt 46,872 51,095
Power purchase arrangement, net 65,455 70,560
Asset retirement obligation 9,054 9,115
Partners' equity
Partnership units 1,323,056 1,323,056
Deficit (266,907) (145,692)
------------------------------------------------------------------------
1,056,149 1,177,364
------------------------------------------------------------------------
Total liabilities and partners' equity $ 1,251,309 $ 1,384,901
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statement of Partners' Equity

(in thousands of dollars except number of units outstanding)

Number of units General Limited
Unaudited outstanding partner partners Total
------------------------------------------------------------------------
Balance, Dec. 31, 2004 149,726,524 $ (7) $1,177,371 $1,177,364
Net earnings (loss) - (2,422) (2,422)
Distributions declared (12) (118,781) (118,793)
------------------------------------------------------------------------
Balance, Dec. 31, 2005 149,726,524 $ (19) $1,056,168 $1,056,149
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements of Earnings (Loss) and Deficit

(in thousands of dollars)

Unaudited 3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------

Revenues
Electrical $ 55,347 $ 41,283 $ 171,504 $128,417
Capacity 38,476 37,148 148,938 141,646
Thermal and other 13,841 5,716 40,573 14,396
Cost of fuel (55,137) (33,233) (176,864) (113,822)
------------------------------------------------------------------------
Gross margin 52,527 50,914 184,151 170,637
------------------------------------------------------------------------
Depreciation and
amortization 96,268 16,366 143,629 61,344
Operating and maintenance 8,050 6,605 39,007 36,638
------------------------------------------------------------------------
Operating expenses 104,318 22,971 182,636 97,982
------------------------------------------------------------------------
Operating earnings (51,791) 27,943 1,515 72,655
------------------------------------------------------------------------
Interest expense 920 859 3,937 3,202
------------------------------------------------------------------------
Net earnings (loss) $ (52,711) $ 27,084 $ (2,422) $ 69,453
------------------------------------------------------------------------
------------------------------------------------------------------------
Deficit,
beginning of period $(183,307) $(143,131) $(145,692) $(140,875)
Net earnings (loss) (52,711) 27,084 (2,422) 69,453
Distributions declared (30,889) (29,645) (118,793) (74,270)
------------------------------------------------------------------------
Deficit, end of period $(266,907) $(145,692) $(266,907) $(145,692)
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements of Cash Flows

(in thousands of dollars)

Unaudited 3 months ended Dec. 31 12 months ended Dec. 31
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Operating activities
Net earnings (loss) $ (52,711) $ 27,084 $ (2,422) $ 69,453
Depreciation and
amortization 96,703 16,881 145,462 63,274
Non-cash interest expense 88 91 338 337
------------------------------------------------------------------------
44,080 44,056 143,378 133,064
------------------------------------------------------------------------
Change in non-cash
operating working
capital balances (25,010) (5,603) (14,381) (3,991)
------------------------------------------------------------------------
Cash provided
by (used in) operating
activities 19,070 38,453 128,997 129,073
------------------------------------------------------------------------
Investing activities
Capital expenditures (180) (1,524) (11,824) (10,760)
Acquistions - (79,470) - (79,470)
------------------------------------------------------------------------
Cash provided
by (used in) investing
activities (180) (80,994) (11,824) (90,230)
------------------------------------------------------------------------
Financing activities
Distributions paid to
unitholders (39,154) (22,102) (121,069) (72,866)
Proceeds from issuance of
partnership units - 30,000 - 30,000
Advances to related
parties, net of
repayments 13,048 36,151 10,646 8,769
Levelization repayment
to TransAlta Energy
Corporation (252) (133) (978) (526)
Repayment of long-term
debt principal (1,009) (939) (3,926) (3,653)
------------------------------------------------------------------------
Cash provided by (used in)
Financing activities (27,367) 42,977 (115,327) (38,276)
------------------------------------------------------------------------
Increase (decrease)
in cash (8,477) 436 1,846 567
Cash, beginning of
period 11,599 840 1,276 709
------------------------------------------------------------------------
Cash, end of period $ 3,122 $ 1,276 $ 3,122 $ 1,276
------------------------------------------------------------------------
------------------------------------------------------------------------


This news release may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TransAlta Power, L.P. and TransAlta Cogeneration, L.P. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward looking statements. Some of the factors that could cause such differences include legislative or regulatory developments, competition, global capital markets activity, changes in prevailing interest rates, currency exchange rates, inflation levels and general economic conditions in geographic areas where TransAlta Cogeneration, L.P. operates.



TransAlta Power, L.P.
Box 1900, Station "M"
110 - 12th Avenue S.W.
Calgary, Alberta Canada T2P 2M1

Phone
403.267.7110

Website
www.transalta.com

CIBC Mellon Trust Company
P.O. Box 7010 Adelaide Street Station
Toronto, Ontario Canada M5C 2W9

Phone

Toll-free in North America: 1.800.387.0825
Toronto or outside North America:
416.643.5500

Fax

416.643.5501

Website
www.cibcmellon.com


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