TransAlta COO speaks about the company’s 100 years of achievement

Mar 16, 2010

Dawn Farrell – TransAlta Chief Operating Officer – speaks to the Independent Power Producers of Alberta about 100 years of TransAlta history and how the next 100 will differ from the last. This speech was given in Banff, Alberta on March 16, 2010.

Final – Check against delivery

Good morning. Thanks so much for the opportunity to join you today. I want to thank IPPSA for organizing this important business forum.

Recently, in preparing for this speech, I was asked about TransAlta’s plans to celebrate its 100th anniversary. This made me reflect on a couple of things:

First, who we are today. That we are Canada’s largest wholesale electricity generator. That we supply half of Alberta’s power. And that most of this power comes from fossil fuels while our renewables portfolio is growing rapidly.

The second reflection I had was that many people would be surprised to learn how rich and varied our history is. And it’s our deep, rich history that really makes us who we are today. Our company has grown and changed with the times, from early frontier days, the depression, war years, changing economies right up to the emergence of today’s strong and prosperous Alberta. It’s a history that has included a future prime minister, some of the province’s most enterprising business leaders and many other exceptional people. Or that it’s an exciting story of progress from a half dozen employees in a Calgary office to several thousand today across three countries.

In a few words, our company has grown up with this province. And we’re proud of our history.

But more than that, we take strength from our history. It reminds us of our defining qualities as a company. It guides us in adapting and contributing to change.

And so it’s very much in this spirit that I hope to contribute to this forum by sharing TransAlta’s history — what have been some defining moments and how we are building on our past to prepare for continued success in our future. As I think ahead to the next 100 years,  I wonder how much our company’s founders thought ahead and what they knew as they faced different challenges in creating a new company.

Building a strong foundation

In the business world, success involves timing. And there was certainly an element of good timing to our company’s early success.

As the story goes, the idea for Calgary Power, our predecessor company, gets its start in the early 1900s on a train journey across Canada. Max Aitken happens to look out the window and spots some undeveloped hydro sites in the Rockies and sends his friend R.B. Bennett to investigate.

Certainly, there’s an element of chance in the discovery. But there’s also good fortune. Because these two men are not your average businessmen.

Aitken is a successful young entrepreneur based in Montreal. He’s already made a fortune selling bonds. And he’s turned a number of failing businesses into successful companies. Bennett is a successful lawyer, originally from the Maritimes and now based in Calgary. He’s known as an expert negotiator.

Together they make a formidable business team.

And they like what they discover: good undeveloped hydro sites and a good business opportunity. In the small nearby city of Calgary, privately held companies are vying to supply power, and none of them are doing it well. The resulting service is unreliable and expensive.

Aitken sees a niche and puts together a plan. The new company — Calgary Power Company — will meet local demand for lower cost, reliable electricity by building up hydro dams on the Bow River. It’s a sound plan backed by sound resources. As it happens, Aitken has close links to the financial markets and brilliant financiers such as Izaak Walton Killam, who is working for Aitken’s investment firm, Royal Securities Corporation.

With a strong plan and strong resources behind him, Bennett successfully negotiates a contract to supply the city with electricity.

Calgary Power’s first major project will involve building the province’s first large-scale hydro dam and power plant at Horseshoe Falls on the Bow River about 80 kilometres upstream from Calgary. It’s tough work and will require 200 workers using picks, shovels and wheelbarrows. When it’s complete, it will provide 14,000 kilowatts.

The project is built with solid engineering and it’s built to last. Horseshoe continues to operate today.

In a sense, this early power plant is a symbol of the company’s early beginnings: it is built to last, it has solid foundations.

Good business strategy requires an instinct for customer needs and how the future may unfold. And our company’s founders had good instincts that enable them to create solid foundations for the new company.

From the start, it’s Aitken’s whole philosophy that if you can provide reliable, low-cost electricity, you create a strong market. And the new company fulfils this need. The Horseshoe Dam and subsequent Calgary Power plants improve the reliability of electricity and bring the costs of electricity down substantially for the people of Calgary. The business is off to a solid start.

At the same time, the founders have a plan to evolve their business in step with changing demand. Starting with Horseshoe, they plan to add new units on the river to stay ahead of changing electricity demand. Over time, this develops into an integrated generation system of dams and storage basins that further ensures the supply of reliable, low-cost electricity.

The founders had good business instincts. They also had a social conscience.

As a final comment, it’s interesting to note that our company develops a community presence right from the start. A.E. Cross, one of the founders of the Calgary Stampede, becomes one of the first directors of the company. In turn, the company sponsors the very first Stampede in 1912. From the start, our company has solid roots in the community.

This gives you a quick overview of how the company started.

Aitken and Bennett go on to other great things. Bennett becomes one of Canada’s prime ministers. Aitken (later known as Lord Beaverbrook) becomes a famous newspaper baron in Great Britain. Aitken also sells his investment firm, Royal Securities, to Izaak Walton Killam. The investments include ownership of Calgary Power, and, as a result, Killam will own the company privately from the 1920s through to the mid-1950s.

But the work Aitken and Bennett have begun continues. The foundation for our company is set.

Certainly, the founders of Calgary Power saw the value of hydro to the future of Alberta. This is a legacy decision that continues for TransAlta, where we operate more than 800 megawatts of hydro.

But this is not the only legacy decision in our history. Another is our move into coal.

To understand this part of our history, we need to fast forward a few decades.

The move to coal

Before we get to this part of the story, let’s set the scene. It’s the early 1950s. A few years before, the big oil discovery at Leduc has occurred and the economy is on a rapid upswing.

By now, Calgary Power has expanded successfully from Calgary throughout southern Alberta to other areas of the province. It’s supplying most of the power in the province, including the growing industrial and economic boom. But the growing demand puts pressure on its generation capacity.

And so we enter the next phase of the company’s story.

For some years, the company has been under the leadership of CEO Geoff Gaherty. Gaherty is a brilliant engineer and an exceptional planner. He’s known for his ability to think clearly and honestly through difficult challenges. And he’s the right leader for the times.

Under Gaherty, the company’s long-range planning leads to a decision that will define its future for many years. The company’s planners consider hydro, but at the time there are few commercial hydro sites available to meet the demand.

So they turn to coal.

They know that Alberta is blessed with tremendous carbon resources with huge quantities of coal close to the surface. But no one has ever mined coal for power on a large scale before.

Under Gaherty, that changes. His planners begin to create a new integrated business model that will rely on large centralized coal-fired power plants close to coal mines.

The plan becomes a catalyst for action. Gaherty’s engineers and planners next scour all potential sites across the province to find the right site. They study drilling results which show the depth and the quality of the coal. They look at the relationship between mine and plant. They evaluate the closeness of the sites to electricity markets.

Eventually, they find the ideal site at Lake Wabamun. No other potential thermal power sites has anything like it: high quality coal, reserves in excess of 50 million tons and a site close to Edmonton, an important Calgary Power market.

It’s a bold move to bet the future on the coal deposits. And it works with spectacular results.

Calgary Power acquires large coal reserves at Wabamun at low cost (about a cent a ton). They build the company’s first thermal generating plant near Wabamun, using the best technology of the day. Originally the plant produces 66 megawatts but ultimately it will be expanded to nearly 570 megawatts — more than 40 times the capacity of the original Horseshoe hydro plant.

For many years, the new coal-fired facility will be one of the most productive power plants in North America. The result is power prices in Alberta that are as low — or lower — than other places in the country.

The company has responded quickly and innovatively to a challenge. And they have done so with a certain pragmatism.

In making the transition, Gaherty and his team do not abandon one generation system at the expense of the other. Instead, they combine them, complementing the reliable low-cost hydro system with another even lower-cost system. The result is a new synergy of hydro and coal that is strong, provides balance and efficiency, and will serve the company and Albertans for many years to come.

Of course, that’s not the end of our company’s story.

Addressing environmental concerns

Since our move to coal, our company has had to make other bold moves to adapt to changes.

Throughout the 1950s and 1960s, the consumer continues to ask for reliable, low-cost power. And that is what our company gives them largely on the strength of low-cost, abundant coal.

But then, in the 1970s, something happens to change this situation. Now what consumers start to ask for is reliable, low-cost power — with lower impacts to the environment. The industry soon becomes the focus of intense environmental concerns.

One of the industry leaders who is sensitive to the change is Marshall Williams, our company’s CEO in the 1970s.

As a junior executive, he’s helped to buy up our coal reserves in the 1950s and 1960s. At the same time, he knows the company is operating in changing times. And he’s a problem-solver. One of his sayings is: “View problems not as road blocks. Accept them as challenges and translate them into opportunities.”

Not surprisingly, Marshall sees a need for a different response to the environmental challenge. He doesn’t use the term “sustainable development” (the term has yet to be invented) but his thinking is based on the same concept — carrying out electricity development in a more responsible, sustainable way. It’s all part of prudent business management, environmental stewardship and good community relations.

Under Marshall’s leadership, a new sustainable approach starts to take hold in our business in the 1970s and 1980s. At Wabamun, our company begins to carry out progressive land reclamation programs well before government regulations. We introduce new technologies to capture fly ash from coal-fired plants and protect air quality. The company starts to invest in long-term research to explore cleaner forms of power generation. And the company works actively to promote environmental awareness in the community. Marshall himself takes an active visible role on the environment in the community, becoming the first chairman of SEEDS, a Canadian not-for-profit foundation dedicated to teaching young Canadians about energy and the environment.

The shift to sustainability

This is a start of a new era and the start of a new commitment — one that has continued to evolve and be nurtured by other leaders, including Ken McCready, Harry Schaefer and notably Steve Snyder.

For more than three decades now, we’ve recognized that electricity producers have to play a special role in sustainable development. Today we’ve defined a strategy of sustainability as a proactive and strategic balance that ensures growth, environmental stewardship, workplace and community health, and shareholder returns.

It’s a strategy that is inspiring us today as we grow and diversify our generation business through two key initiatives … building our investment in renewables and pursuing clean coal technology.

Today we are developing one of the best green portfolios in the electricity industry. Already we are Canada’s largest publicly traded wind energy producer. We have hydro, gas and investment in geothermal assets. In fact, renewables account for 22 per cent of our generation capability, and we plan to significantly increase investments in green energy projects over the next five years.

At the same time, we’re repositioning our coal assets.

Coal continues to be an important part of our business mix, just as it is for Alberta’s electrical needs. Currently, it represents 57 per cent of our generation capacity.

But emerging environmental targets and policies mean we must adjust over time to a world that is less dependent on coal and to the development and application of new technologies that will enable coal plants to continue to operate in a cost-effective manner.

To do that, we’re advancing Project Pioneer, an historic initiative to help lead the development of carbon capture and storage technology (or CCS for short). And we are doing so in partnership with the federal and provincial governments, which are providing significant funding and have shown exceptional leadership behind this major initiative.

The project will be one of the largest integrated CCS projects of its kind in the world and will involve installing CCS technology at Keephills 3 — a 450 megawatt coal-fired generating plant under construction west of Edmonton.

The plant will use supercritical boiler technology, best available technology to reduce air quality emissions. The CSS technology will add the benefit of capturing one million tonnes of CO2 a year. These are important steps to ensuring Alberta’s future power needs are met with a reliable, cost-effective and environmentally responsible source of electricity. They will also make Keephills Canada’s most advanced coal-fired facility.

In the last 10 minutes or so, I’ve tried to give you a sense of some defining moments in our history.

What a difference 100 years makes!

A century ago TransAlta began modestly as a local company with one 14,000 kilowatt plant serving a small city of about 40,000.

Today we are an international energy company with 70 plants across Canada, the United States and Australia, serving millions of consumers.

Along the way, we have achieved many milestones, including:

  • bringing electricity to rural areas
  • pioneering environmental practices
  • becoming an early player in cogeneration
  • helping to found the World Business Council for Sustainable Development
  • becoming a major wind power player
  • being the first Canadian electric generation company to be listed on the New York Stock Exchange
  • and being named to the prestigious North American Dow Jones Sustainability Index year after year since its inception.

These are just some of the achievements that come to mind. Certainly, we have a great history and a promising future.

And on that note, I would like to shift our discussion to the future.

The next 100 years

A key theme of this forum is what our industry needs to do to meet its major challenges today and over the next 100 years.

Each of our companies will approach the future in our own way, based on our histories and our aspirations. And so I would like to share a summary of defining characteristics that our company sees as a platform for continued growth in the future. And they are:

  • strong innovation
  • strong entrepreneurial spirit
  • strong Western values
  • strong people

Let’s start with … strong innovation.

Today our industry operates in a time of transformation. One of the biggest challenges we will all need to meet is developing generation resources in a way that maintains our Alberta prosperity while addressing environmental concerns.

Today fossil fuels provide the bulk of our energy supply and the power behind our prosperity. Coal is a vital part of Alberta’s electricity generation. It has provided the basis of low-cost, reliable electricity for many years.

In recent years, some people have called for the closure of our province’s coal-fired power plants before they reach the end of natural life expectancy. That would be a terrible mistake. Certainly it would reduce emissions, but it would also result in power shortages, reliability problems and significantly increased costs.

At TransAlta, we believe that tough problems can be solved by human innovation. And when it comes to coal-fired electricity generation, technological innovations like CCS can be part of the solution. This technology could be a game-changer and secure a future for one of the world’s most abundant, reliable and economic sources of fuel.

In thinking through our options, we need to constantly remind ourselves that the global environmental problem is about emissions. It is not about someone’s view of the “right” kind of fuels or “good versus bad” fuels. I firmly believe that Albertans will require us to use all the resources available to meet our electricity objectives. We just have to find how to use them in an acceptable way.

That leadership can start right here in this province.

As we pioneer new technological innovations, we’ll also pursue a strong entrepreneurial spirit. And I don’t mean ‘entrepreneurial’ in the Webster’s’ dictionary sense – to simply undertake an endeavour. I’m talking about true entrepreneurial spirit – or, seeing ahead of the curve and taking advantage of it.

… strong entrepreneurial spirit

Today’s customers want their power to be clean and green.

Encouraging new coal technologies is one part of the answer to greening our power to meet customer needs.

The other half of the equation is renewables. By accelerating the development of renewable and alternative resources such as wind, hydro and cogeneration, Alberta can start to reduce its carbon footprint and buy the time we need to commercialize base load technologies such as CCS on a large scale.

Developing a green growth portfolio provides a good risk strategy. And it makes good business sense.

As one of Canada’s largest wind developers, we believe that wind is among the most promising and dynamic economic engines we have today. Wind-generated power has come of age. Once seen as an alternative or niche business, wind power now has mature technology, economic scale and healthy competition.

Our growth over the next five years will create a much-needed source of power generation. Close to half of this will be renewables, such as wind, geothermal and run of the river. When complete these projects could bring renewables to nearly a third of our total generating capacity.

Certainly, our focus on renewables and clean coal technology will guide us in the years ahead.

At the same time, we’ll be guided by strong Western values …

… strong Western values

It’s not an accident that our company shares a spot in this city’s early history along with the Calgary Stampede. We are extremely proud of our Western roots and Western values — like a strong sense of community.

As we grow as a Canadian company, we will continue our focus on the West. Along with the jobs and economic contributions we generate, we will continue to invest directly in the communities where we operate …starting right here in this province.

Finally, I’d like to speak to the importance of strong people in a company like ours….

… strong people

In the final analysis, TransAlta’s success as a company depends on quality people. This is evident throughout our history. It is quality people who founded this company, quality people who grew the business and quality people who will help to create its future.

Today translating our ambitious business plans into day-to-day reality rests with all our employees. In this respect, our company has been very well served. Over the years, our employees have shown that they are resilient, dedicated and focused on success. They have been, and will continue to be, our greatest source of competitive advantage.

Rose-coloured glasses aside – our people have come through when we’ve really needed them. TransAlta has had its share of obstacles and challenges over the years: ice flows on the Bow River, flooding issues around our Edmonton operations, gas turbines with design flaws – and most recently, availability issues at our coal plants. In every case, our people have come through with steely determination – and more often than not, they’ve come through with solutions.

In summing up, we wouldn’t be here as one of Canada’s major electricity companies if it were not for our people and our other defining strengths of innovation, entrepreneurialism and Western values.

They are the strengths on which our history is solidly based. They have taken us successfully through the first 100 years and I am willing to predict they will take us through the next 100.

If he were here today, Max Aitken, our first president, would not recognize the company that TransAlta has become. Much has happened in the course of a century. But surely he would recognize our entrepreneurial spirit, our drive to innovate and our connections to the community. He would understand the competitive instinct that is leading us today to create a whole new era for coal with the balance of renewables. And then as now he would see a company with a great future.

For the last century, TransAlta has grown and prospered by meeting the electricity needs of Albertans reliably, affordably and responsibly. As we look to the future, I am confident that we will be powering new generations for many years to come.

Thank you for the opportunity to share our story with you today.

March 16, 2010

Dawn Farrell
Chief Operating Officer