Sustainability scorecard

TransAlta tracks progress against commitments made. The following table shows progress against commitments set forth in our 2008 Report on Sustainability, and outlines commitments for the year ahead.

+ commitment attained   ++ commitment exceeded   – commitment not met   +/– commitment met in part

Sustainability Focus TransAlta Commitment – 2009 Status Progress Made 2010-2012 Commitment
Excellence in governance Continue to adhere to TransAlta’s Best Practice Standards for Governance, and achieve top decile performance for governance in the Canadian utility industry +
 TransAlta was awarded the 2009 Conference Board of Canada National Awards in Governance This is an ongoing commitment and the way TransAlta does business, so will not be listed as an annual commitment in future reports
Improved risk management Develop an improved business continuity plan to ensure robust plans are in place for all critical processes and risks across the organization + Continued with risk management processes following from a major asset review in 2008. TransAlta was recognized for its enterprise risk management approach by the Conference Board of Canada National Award for Governance in 2009 This is an ongoing commitment and the way TransAlta does business, so will not be listed as an annual commitment in future reports
Board level oversight of sustainability Through the Audit and Risk, Human Resources, and Governance and Environment Committees of the Board, provide continuous review of the company’s sustainability performance and risks + Continuous review and oversight of the company’s performance and risks was conducted throughout 2009 This is an ongoing commitment and the way TransAlta does business, so will not be listed as an annual commitment in future reports
Environment:
Water Undertake a water audit at Alberta coal-fired power plants +/– A complete water audit was not conducted. However, a water balance study for the Sundance cooling was undertaken and it was determined that further reuse of the water would have serious negative impacts for our operations No new water initiatives are planned for AB Thermal in 2010
Implement a closed loop cooling and ultra-filtration system at Sarnia + The closed loop cooling system is in the final commissioning stages. Once complete it will further reduce possibility of oil contamination to rivers. An ultra filtration system was installed to further purify the water to assist in the reduction of water treatment chemical usage, blow downs etc. No new water initiatives are planned for Ontario in 2010
Increase the waste water recycled at Centralia by 10 per cent over the 2008 achievement of 50 million U.S. gallons ++ Centralia exceeded its goal: 115 million U.S. gallons of wastewater to the scrubber was recycled in 2009 No new commitments are set for 2010. Centralia will continue to recycle waste water with the new system
Emissions Evaluate emerging technologies for greenhouse gas emissions reduction, including carbon capture and storage + Analysis was conducted on carbon capture and storage (CCS) and TransAlta was awarded government funding to proceed with Project Pioneer Complete front-end engineering and design (FEED) study to determine CCS project viability
Reduce mercury emissions by 70 per cent at Alberta operations by 2011 + Mercury control tests conducted in 2009 indicate we will meet the 70 per cent threshold Commission the mercury controls technology at Alberta operations to meet the 70 per cent reduction in 2011
Undertake full-scale mercury technology testing at Centralia + Testing was conducted and an activated injection product was selected Continue testing at Centralia to meet our voluntary commitment of 50 per cent reduction of mercury levels by 2012
Spills and exceedances Reduce environmental spills or exceedances to 31, a 10 per cent reduction from 2008 ++ TransAlta had 26 environmental spills or exceedances in 2009 Reduce environmental spills or exceedances to 23 for former TransAlta assets in 2010
Waste Undertake a waste stream inventory in Alberta and determine a plan for reduction targets – The waste stream audit was conducted, with 41 opportunities for improvement identified. However, due to operational priorities at the plant sites in 2009, few initiatives were undertaken No specific waste management goals have been set for 2010. We will continue to look for every opportunity to reuse, recycle or recover waste
Aim to reuse, recycle or recover at least 40 per cent of waste + In 2009 41 per cent of waste at plant sites was recycled No specific waste management goals have been set for 2010. We will continue to look for every opportunity to reuse, recycle or recover waste
Determine recycling opportunities for steel, copper, concrete and equipment from Wabamun decommissioning + Recycling opportunities are continually reviewed for this project and plans are in place to recycle metals once demolition commences We will continue to look for every opportunity to reuse, recycle or recover waste throughout the decommissioning process
Energy consumption Quantify station service (the amount of energy consumed to produce energy) and identify opportunities for reductions – An energy consumption assessment was not completed New targets for energy consumption have not been set for 2010. Efforts at plant sites will be focused on emissions reductions
Generation from renewable sources Continue to diversify our energy portfolio by increasing production in renewables. Generate a minimum of 10 per cent of electricity production from renewable sources by 2020 (capacity is currently 16 per cent) + TransAlta increased its renewable energy portfolio by 7 per cent in 2009, to a capacity of 22 per cent. This was achieved through expanding our wind fleet and through the acquisition of Canadian Hydro Developers Complete construction and commence commercial operations of the Kent Hills Wind Farm expansion. The project will add 54 MW of renewable energy to New Brunswick

Commence commercial operations of Summerview 2 wind farm to add an additional 66 MW of renewable energy to Alberta
Environment, health and safety governance No overdue environment, health and safety audit action items reported to the Board of Directors + In 2009 there were no overdue environment, health and safety audit action items reported to the Board of Directors We will integrate Canadian Hydro assets into TransAlta’s EHS governance systems and ensure conformance of ISO and OHSAS EHS standards at all TransAlta-operated properties
Biodiversity Develop a biodiversity policy + Commitments to protect biodiversity have been added to TransAlta’s Environment, Health and Safety Policy This is an ongoing commitment and the way TransAlta does business, so will not be listed as an annual commitment in future reports unless significant new projects are underway
Social:
Safety performance Reduce combined injury frequency rate (IFR) by 10 per cent per year from 2008 – Combined IFR was 1.41 in 2009, an increase from 2008 levels Reduce combined injury frequency rate (IFR) to 1.28

Enhance safety training and standardize safety processes across the fleet
Sustainability awareness Integrate sustainability into new employee orientation and increase communication of sustainability issues with all employees +/– New environment, health and safety training modules were developed for new employees which include aspects of sustainability. Communication of sustainability initiatives was enhanced through company newsletters, the intranet site and initiatives through an employee eco-action committee A training module specifically focused on sustainability at TransAlta will be developed and included in new hire orientation
Talent management Implement programs to attract and retain a talented workforce, including system-wide leader development training, strategic recruitment programs and improved training management systems +/– The economic downturn of 2009, along with the acquisition of Canadian Hydro Developers staff, negated the need for focused recruitment efforts. However, additional training programs were added for front line leaders, managers, and directors, and site maintenance staff training enhanced. Our new grad program commitments were met; we have a two-year rotational program that develops this new talent in our company Talent management strategies are developed each year based on company priorities and economic conditions. This is an ongoing commitment and the way TransAlta does business, so will not be listed as an annual commitment in future reports
Human rights Formalize human rights principles + A corporate Human Rights and Discrimination Policy was put in place in 2009 and applies to all employees, contractors and suppliers Adhering to our human rights policy will be an ongoing commitment expected of all employees and contractors; no specific target is set for 2010
Formalize performance management processes for unionized employees Build on existing performance management practices with unionized staff and implement a formalized process +/– A formal performance management process was not established; instead we focused on training the front line supervisors and managers in the area of managing performance in a unionized environment so that performance management is done more effectively on a daily basis This is an ongoing commitment and the way TransAlta does business, so will not be listed as an annual commitment in future reports
Community investment Continue to maintain Imagine Canada and Alberta’s Promise standings +/– In 2009, TransAlta invested $3.9 million directly into the communities in which we operate. Despite meeting contribution limit requirements, we have chosen not to maintain our standings with Imagine Canada or Alberta’s Promise We will invest approximately $3 million into communities in 2010, and focus efforts on driving improved activation across all our partnerships and better engage employees in this process. We will also investigate valuable partnerships in our new operating communities
Economic:
Note: refer to TransAlta’s 2009 annual report for a complete listing and description of financial performance metrics
Availability and production Achieve top decile availability in the industry of 90 to 92 per cent and optimize production on an annual basis – Our availability in 2009 was 85.1 per cent, below our 2009 target due to higher planned and unplanned outages Achieve top decile availability in the industry of 90 per cent and optimize production on an annual basis
Productivity Offset the impact of inflation on operations, maintenance and administrative (OM&A) costs on an annual basis – In 2009, the accelerated major maintenance program drove a three per cent year-over-year increase in OM&A costs Offset the impact of inflation on OM&A
Sustaining capital expenditures Make sustaining capital expenditures more predictable and in line with our long-range plans, in the range of $270 to $390 million + Sustaining capital expenditures were $380 million in 2009 Sustaining capital expenditure target is $295 to 340 million
Earnings per share Generate low double-digit comparable earnings per share growth on a comparable basis annually – Earnings decreased in 2009 due to higher planned and unplanned outages at Alberta coal operations, lower hydro volumes and pricing and lower energy trading gross margins Generate low double digit comparable earnings per share growth on a comparable basis annually
Cash flow Generate $800 – $900 million in cash flow from operations – Cash flow from operations was $580 million in 2009 due to lower cash earnings, unfavorable changes in working capital and receipt of an additional $116 million PPA payment in 2008 Generate $850 to 950 in cash flow from operations
Investment ratios Maintain investment grade credit ratings and operate the business within established financial ratio ranges Maintain investment grade credit ratings and operate the business within established financial ratios:
Cash flow to interest coverage (times): minimum of 4 + Cash flow to interest coverage was 4.9 Cash flow to debt (times): 4 to 5
Cash flow to debt (%): minimum of 25 – Cash flow to debt was 20.1 per cent Cash flow to debt (%): 20 to 25
Debt to invested capital (%): maximum of 55 – Debt to invested capital was 56.1 per cent Debt to invested capital (%): 55 to 60
Sustainable long-term shareholder value Achieve greater than 10 per cent for both return on capital employed (ROCE) and total shareholder return (TSR) – Comparable ROCE was 5.9 per cent; target was not met due to increased outages, lower hydro volumes and prices, lower trading margins and the Canadian Hydro Developers acquisition

TSR was 1.4 per cent, below target due to difficult market conditions

 Increase comparable ROCE and TSR by 10 per cent annually
Expand customer base New commitment for 2010 n/a Initiate expansion of customer base to include new mid to large size commercial and industrial clients.