Performance Measures

Our goal is to achieve consistent 90 per cent fleet availability and optimize production.

Availability is a key factor in determining revenue in many of our contracts. Availability is the percentage of time a generating unit is capable of running, regardless of whether or not it is generating electricity. As plants need maintenance and occasionally break down, 100 per cent availability over an extended period of time is not achievable. 

Production is the amount of electricity generated and is measured in gigawatt hours (GWh). It is a significant driver of revenue in certain contracts.

Availability and production targets were not met in 2009 due to higher planned and unplanned outages at Alberta coal operations, higher unplanned outages at Centralia Thermal, lower hydro volumes, and lower customer demand.

Our goal is to offset the impact of inflation on OM&A.

Managing our maintenance and administration costs is essential to improving the bottom line. Productivity is measured as operations, maintenance, and administration (OM&A) expense per installed megawatt hour (MWh).

In 2009, the accelerated major maintenance program drove a three per cent year-over-year increase in OM&A costs per MWh of installed capacity. Excluding accelerated major maintenance, OM&A costs were held flat to 2008.

Our goal is to make sustaining capital expenditures more predictable and in line with our long-range plans.

Sustaining capital expenditures are investments made to maintain our current operations. They include routine and major maintenance on our plants, equipment for our mines, and investment in our information systems and productivity.

The sustaining capex in 2009 was directly in line with the target of $270 - $390. 

Our goal is to achieve an annual injury frequency rate of 1.

Safety is a core value at TransAlta. We take it very seriously and measure ourselves against industry-wide standards. The Injury Frequency Rate (IFR) measures all fatal, lost time and medical aid injuries.

In 2009, we missed our goal of a 10% reduction in the IFR and our overall employee and contractor IFR actually increased over 2008.

Our target is to generate low double digit EBITDA and comparable EPS growth on an annual basis.

Earnings before interest, tax, depreciation, and amortization is frequently used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.

Comparable earnings per share (EPS) is frequently used to measure a company's ongoing profitability.

Earnings per share 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.

Low double digit growth

0.90

1.46

1.31

Our goal is to generate significant cash from operations.

Cash generated from operations is used to maintain our equiptment, meet our debt repayment obligations, return capital to shareholders through dividends and share buybacks, and invest in new capacity.

Cash flow from operations decreased in 2009 due to lower cash earnings, receipt of an additional $116 million PPA payment in 2008, and unfavourable changes in working capital.

Investment Ratios

Our goal is to maintain investment grade credit ratings and operate the business within established financial ratio ranges.

Financial strength and flexibility are critical to the company's ability to create value, capitalize on opportunities and manage industry cyclicality. The ratios used to measure our performance include cash flow to interest, cash flow to total debt, and debt to invested capital. Credit rating agencies use these ratios when evaluating the financial strength of the company.

In 2009, we maintained a strong balance sheet, financial ratios, ample liquidity, and stable investment grade credit ratings supported by our high level of contracting and low risk business profile.

Cash flow to total debt (%)

Debt to invested capital (%)

20 - 25

55 - 60

20.1

56.1

31.1

48.1

30.7

46.8

Sustainable Long-Term Shareholder Value

Our goal is to achieve greater than 10 per cent for both comparable ROCE and TSR.

We also measure returns to our shareholders and investors in two ways: Comparable return on capital employed (ROCE) and total shareholder return (TSR). ROCE measures the economic value created from capital investments. TSR is the total amount returned to investors over a specific holding period and includes capital gains and dividends.

We continue to create economic value from capital investments.

Comparable ROCE was lower in 2009 due to increased planned and unplanned outages at Alberta coal operations and the acquisition of Canadian Hydro. Given difficult market conditions throughout the year, TransAlta's TSR was below 10 per cent. Over a five-year period our cumulative TSR has been 61 per cent.