environmental sustainability - transalta · environmental sustainability ... but we are...

We continued to transition our generation mix in 2014 toward less carbon-intensive fuels, while working to protect air, land, water and biodiversity.

EnvironmentalSustainability

The ferruginous hawk – TransAlta works to minimize the environmental impact to wildlife near our facilities.

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31TransAlta Corporation | 2014 Report on Sustainability

16%Decrease inGHG Gross EmissionsSince 2005

14%Increase in GHG Gross EmissionsOver 2013

3,289,105Tonnes CO2 Prevented fromEntering the Atmosphere in 2014 Through Our Renewables Portfolio

Our coal net generation has increased 34 per cent in the last two years.This is the result of Sundance units 1 and 2 coming back online, increased market demand in the Pacific Northwest (where our Centralia plant is located), and improved operational availability of our facilities. As a result, we have seen a steady increase in our air emissions since 2012. As we begin to retire coal units, starting in 2019, we will see a dramatic decrease in air emissions over a 10-15 year period. By 2030, we will have realized a 90-95 per cent reduction of air emissions from coal compared with 2005 levels.

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Mercury Emissions

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2012 2013 2014


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Managing EmissionsTransAlta actively monitors, reports and manages the air emissions that result from our thermal fired power plants. Highlighting our commitment to disclosure, TransAlta received a Carbon Disclosure Project score of 85 in 2014. The score was the highest in the Canadian electric utility sector.

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Sustainability Targets See page 13

Restatements were made to 2012 and 2013 GHG emissions totals (page 64), please refer to our performance indicators and discussion on notes and numbers (page 68).

https://twitter.com/hashtag/transalta

32 TransAlta Corporation | 2014 Report on Sustainability

Environmental management is a key component of TransAlta’s sustainability strategy.

California Carbon Allowances – Managing GHG LiabilitiesTransAlta trades power generated from our Centralia, Washington coal-fired facility into the state of California, which has one of the most stringent regulatory frameworks managing GHG emissions. TransAlta reduces the GHG liabilities we incur in this market by purchasing carbon allowances to reduce our obligations. Participation in this leading regulatory market provides TransAlta with valuable understanding of carbon price and dispatch mechanisms and will be advantageous as new federal programs regulating existing electricity plants in the U.S. are introduced.

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Emissions management also involves forecasting our future emissions. Greenhouse gas regulations passed by the Canadian Federal Government in 2012 will result in the significant reduction of greenhouse gas emissions from our coal-fired facilities in the next 15 years. Further support for reducing greenhouse gas emissions will come from our e¤orts to reduce the NOx and SO2 emissions from our Alberta coal facilities by 95 per cent by 2030. Over the years, we’ve worked to find proactive and innovative solutions to ensure both environmental progress and economic sustainability. In 2014, TransAlta worked with the Alberta government, communicating our concerns about the need for better alignment between provincial NOx and SO2 standards with the Federal greenhouse gas regulations. In our view, greater alignment will help avoid ine�cient capital expenditures.

In Washington State, we are also committed to the reduction of greenhouse gas emissions from our coal-fired power plant. An example of this is the historical agreement we reached regarding our Centralia operation in Washington State, where we worked closely with the government, stakeholders and communities to achieve a consensus-based plan to transition the closure of our coal units in 2020 and 2025.

TransAlta launched TransAlta Renewables in 2013. Learn more here.

https://www.youtube.com/watch?v=2v8xHdfDbjg


Environmental management does not exist adjacent to our business strategy, rather it is an integral part of our business strategy. In 2015 and beyond, we are integrating environmental management within our operational integrity program. A program aimed at optimizing all areas of our operation with a means to reduce downtime, reduce safety incidents and environmental incidents. Currently, 62 of 64 TransAlta owned and operated power generation facilities have environmental management systems based on ISO 14001. This represents 98 per cent of our fleet. Furthermore, all coal facilities in western Canada, our largest footprint, are ISO 14001 certified.

Environmental IncidentsIn 2014, TransAlta recorded a total of 15 environmental incidents, below our 2014 target of 20 environmental incidents. None of our incidents in 2014 were emergencies, nor incurred enforcement actions or fines. Twelve of our incidents occurred at our coal facilities, two at our Highvale mine in central Alberta and one at our Brazeau hydro facility in central Alberta. Incidents included four general water contraventions, three air contraventions, four spill contraventions, four “other” contraventions, one spill to water contravention and one administrative contravention.

Our spills involved relatively small volumes of material and again we did not incur any regulatory penalties or environmental fines in association with these incidents. Of the four spills we experienced, discharged e®uent included sewerage, lubricating oil, hydraulic oil and dust and ash. The total volume of our spills in 2014 was 498 m3 and 87 per cent of this total was recovered.

Incidents are hard to avoid, but we are continuously striving to get better and better. Our environment, health and safety (EH&S) team is applying the same strategy as adopted in safety, tracking all potential environmental incidents to identify leading incidents. Tracking, analysis and active management is intended to eliminate incidents before they happen.

Advancing EHSMS Framework ReviewTransAlta launched a program to evaluate the e¤ectiveness of the environment, health, safety and management system (EHSMS) framework supporting the company’s operations in 2013 and continued advancing this e¤ort throughout 2014.

TransAlta applies the ISO 14001 and OSHAS 18001 benchmarks to guide the management of EHSMS requirements at the asset level. Our EH&S team conducted a high-level gap assessment against these internationally recognized health and safety management system standards.

Cherie Whelan, EH&S team leader, corporate EHS, explains, “This review has enabled us to thoroughly evaluate where we are at with respect to our EHSMS framework and to ensure we have the right tactical corporate standards and guidance documents in place that fit our operations.”

The review process resulted in the proposal of 15 new elements to address gaps in the EHSMS framework. These elements will be examined more closely in 2015, as the operational integrity program is integrated into the business.

Environment, health and safety management systems cover all aspects of daily work, including wind turbine safety training.

Environmental Management

15

Environmental Incidents

201420132012

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The sharp-tailed grouse population continues to thrive near the McBride Lake wind farm.

Biodiversity ManagementTransAlta cares about biodiversity and protecting sensitive species. We manage our power generating activities in alignment with provincial, state and federal environmental laws and, in many instances, our operating protocols surpass regulatory requirements. We engage in robust environmental research and data collection to establish scientifically sound baselines of the natural environment around our facilities and closely monitor the air, land and water in these areas to identify and curtail potential impacts.

Sharp-tailed Grouse Thriving at McBride Wind FarmTransAlta built and has operated the McBride Lake wind farm, near Fort Macleod, Alberta since 2003. The wind farm delivers 75 MW of renewable wind power to Alberta’s grid. During construction of the facility, a sharp-tailed grouse lek was discovered within 500 metres of turbines scheduled for installation. A lek, or “dancing ground,” is an area where males compete for breeding opportunities with females by displaying or “dancing”. The male dance involves fluttering of wings, rapid foot stomping and spinning in tight circles, a commotion that can be heard almost a kilometre away on calm

spring mornings. Leks are used in the early spring, and are used repeatedly for years, even decades. Leks are a limiting factor in the number of sharp-tailed grouse in Alberta, so their presence requires setbacks for industrial developments. When the lek was discovered at the McBride Lake wind farm, TransAlta’s environmental scientists developed a mitigation plan to reduce potential impacts to the lek. At that time, between 20 and 31 individual sharp-tailed grouse were observed.

From 2003 through 2006 and again in 2013 and 2014, TransAlta has monitored the sharp-tailed grouse lek at the McBride Lake wind farm, by conducting morning surveys in the spring, during “dancing” season. During the 2014 survey, biologists counted 44 sharp-tailed grouse, the highest number recorded at the site to date.

The findings are important, as they indicate that the wind farm operations have not exerted a detrimental impact on the breeding activities or longer-term survival of the birds.

Mike Peckford, senior environmental specialist, Wind, says, “We are pleased to see the sharp-tailed grouse at McBride Lake flourishing this past year. Our ongoing eorts to identify environmentally sensitive areas and species, apply restricted activities and respect wildlife on our sites has contributed in a positive way to these results.”



Protecting Wildlife During Australian Pipeline TrenchingTransAlta recently partnered with DBP Development Group (DDG) in the Fortescue River Gas Pipeline joint venture project in Pilbara, Western Australia. Construction began in August 2014 and was completed in March 2015.

During the construction period, TransAlta and DDG contracted a team of six “fauna handlers,” who were responsible for finding wildlife that inadvertently entered the trenches. The handlers would walk the line three hours after sunrise, before the workday began and retrieve rodents, marsupials, mammals, amphibians, birds and reptiles. The same procedure was followed at the end of the workday, and then again, prior to closing each trench.

The fauna handlers are specially trained, certified and licensed to manage the potentially dangerous animals that live in the Australian desert, particularly venomous snakes and large monitor lizards. They don full-length, thick cotton clothing, steel-capped boots, gloves and use a variety of extended hooks and bags to capture and relocate animals.

“When an animal is found, it undergoes a quick visual health check to ascertain its condition, and is then released into the native vegetation in the vicinity of where it was found,” says Jonathan Davies, senior environmental advisor at Monadelphous, KT Pty Ltd., a construction partner on the project that employs the fauna handlers.

A total of 112 critters were returned back into the wild during the eight-month construction period. The e¤ort is an important part of TransAlta and DDG’s commitment to minimizing environmental impact on wildlife and their habitat.

Environmental Operational Management Plans DevelopedIn 2014, TransAlta’s hydro group developed formal environmental operating management plans on a facility-by-facility basis. Each plant’s license was reviewed during the process and clear boundaries were established for how work is to be conducted.

Glenn Isaac, TransAlta’s manager, environment, health and safety, hydro operations, says, “These environmental operating management plans are comprehensive and cover all of the specific do’s and don’ts that facility employees need to be aware of when working with wildlife and working in the water. Having this information in active documents will ensure new project teams are fully aware of how we must work to protect the environment at each of our facilities.”

A smooth knob-tailed gecko, just one of the critters rescued during pipeline construction.


Water ManagementWater has many roles and uses in power generation at TransAlta. Our coal and gas facilities require water for cooling and steam production. The heat energy that is produced from burning coal is used to turn water into steam in boilers, the steam is then passed through steam turbines which turn a generator to make electricity. Our natural gas-fired co-generation facilities burn natural gas to make electricity and steam. The steam is used by industrial and institutional customers (like the Ottawa Health Sciences Centre). At these facilities, water has two main use components: withdrawal and discharge. Our hydro facilities use water in a different way. These facilities convert falling water into electricity as it passes through turbines. Our wind fleet is rather water oblivious; these turbines only need the wind to blow to generate electricity.

In 2014, TransAlta’s total water withdrawal across our fleet was 242 million m3, primarily from rivers where we hold permits to withdraw water and adhere to regulations on water quality. We returned or discharged 171 million m3, back to the source. The difference is largely due to evaporative losses. Our annual water consumption is 71 million m3.

Water and Risk ManagementTransAlta’s sustainable development group conducted a water risk assessment in 2014, utilizing the World Resource Institute’s Aqueduct tool. The Aqueduct tool “helps companies, investors, governments, and other users understand where and how water risks and opportunities are emerging worldwide.”

Matthew Toohey, environmental analyst comments, “The results were encouraging; our overall water risk on a scale of 1-5 is anywhere from 1-3 or low to high risk. Where we encounter ‘high’ risk, we’re already acutely aware of the risk, we understand it, have risk mitigation in place or we’re working towards mitigation. In many cases, the risk is not applicable; in particular, our wind farm operations.”

Identified “high” risk areas include our operations east of Perth in the Goldfields-Esperance region of Western Australia. We purchase all of our water for operations in this region, mitigating risk and reducing baseline stress.

Glenn Isaac, TransAlta’s manager, environment, health and safety, hydro operations.Sustainability Targets

See page 15


A large portion of southern and central Alberta has a medium to high baseline water risk and a medium to high overall water risk. Specifically risk of drought and flood is prevalent. Our wind farm operations are not impacted, but our hydro assets are. In 2013, we felt the full force of flooding in southern Alberta. We’re currently working with the Alberta Government and looking at water management on the Bow River with the objective of helping to minimize future flood risks.

Future infrastructure in southern and central Alberta, coal or gas-fired power generation, which requires large volumes of water for cooling must be acutely aware of the long-term risk of water access. Our Alberta owned and operated coal plants, where we hold all of our own water licenses, are uniquely positioned in a low baseline water stress and low to medium overall water risk area. Although we are slowly beginning the process of shutting coal plants down, we have announced development plans for an 856 MW combined cycle gas plant in the region. The combination of strategic location and design features mitigate water risk in the future, the plant is designed to use less water than a standard combined cycle.

Completing repairs to the access bridge at the Barrier facility following 2013 flood damage.

2014 Flood Recovery UpdateIn 2014, TransAlta’s hydro group continued to rebuild hydro infrastructure that was damaged in the catastrophic 2013 flood. Approximately $22 million was spent across several hydro facilities throughout the year, including the Bighorn hydro plant, where a major transformer was relocated. During this process, two 24-hour stop flows were conducted along the first three kilometres of the Bighorn River. TransAlta conducted a major fish salvage operation during the stop flows, to minimize impacts to fish populations by returning stranded fish to flowing waters.

Rebuilding also proceeded in the Benchlands along the Ghost River. This small community of 10 homes was severely impacted when floodwaters broke the Benchlands dyke. TransAlta rebuilt this structure, in cooperation with provincial and federal authorities, so that it would be in place in time for spring 2014, to prevent future flooding. A series of boulder clusters were added to enhance overall fish habitat.

Our newest and growing operations area, the Pilbara region in Western Australia, has 1-2 or low to medium overall water risk. Despite its remoteness, the baseline water stress in many areas of this region is low due to low population and development.D

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Share the spirit of TransAlta employees and their volunteer e�orts here.

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Waste ManagementMinimizing waste generated by our electrical generating activities is an environmental responsibility we take very seriously. Over the past several years, TransAlta has significantly advanced the recycling opportunities for fly ash and bottom ash generated at our coal-fired facilities. In 2014, we recycled record volumes of fly ash. We also invested in additional infrastructure to capture more of these materials. Recycling fly ash and bottom ash removes environmental liability from our operations, adds incremental cash flow and reduces the potential for groundwater and soil contamination.

We’re also working hard to manage and reduce our day to day waste, hazardous and non-hazardous waste. We have a strong culture of recycling, from paper to metal, and we contract a number of waste management services to keep us in check.

TransAlta has several reclamation projects underway to return former mine sites to a more natural state.



New Centralia Coal Fines Plant Operational in 2014A new plant at TransAlta’s Centralia, Washington generating facility and mine reclamation project is now operational, with a novel technology that recovers coal (for electricity generation) from waste coal fines. Coal fines are the small particles of coal and clay that remain following the coal washing process. The plant began the commissioning process in December 2014 after a year of construction.

Will Greenough, fuel manager for the Centralia facility, says, “Getting to this point took a great amount of creativity and persistence by the reclamation team at the mine, but this breakthrough process will enable us to recover over 250,000 to 350,000 tonnes of coal fines per year.”

The new facility features a series of unique internal components; including hydrocyclones, which strip water from the coal fines; customized dredges; production dredges; spirals, which separate fine coal from clay; screen bowl centrifuges, which remove moisture from the coal; and an extensive conveyor belt system to move material from the recovery plant to the generating facility.

Centralia’s former open-pit mine site supplied the Centralia power plant until 2006. After 35 years of operation, approximately four million tonnes of recoverable waste coal fines have accumulated on site.

The operation of the new coal fines recovery facility will enable TransAlta to cover the cost of the environmental liability associated with the accumulated waste, while providing supplemental fuel for generation.

Storage ponds at the new coal fines recovery area near the Centralia facility.


Implosion of a dragline at the former Highvale mine (Centralia) to prepare it for scrap metal recycling.

Enlarging Fly Ash Sales Opportunities TransAlta’s byproducts business involves the sale of fly ash, bottom ash, gypsum and cenospheres. These non-hazardous materials left over from coal combustion add value to products like cement and asphalt, wallboard, paints, plastics and even bowling balls.

In 2014, TransAlta recycled approximately 840,000 tonnes of coal byproduct materials, a significant increase over the 700,000 tonnes recycled in 2013. Part of the increase is due to increased fly ash production at our Centralia, Washington facility. In addition, in 2014, TransAlta invested in improvements to the air compressor and classifier systems at our Sundance coal-fired facility, which enhanced fly ash recovery volumes.

The TransAlta and Lafarge Joint Venture continues to prove a successful partnership. TransAlta provides an abundant source of fly ash and Lafarge provides their marketing expertise as one of the largest players in the cement and aggregate industry in North America and the world.

On a portfolio basis, TransAlta’s ability to market by-products helps generate additional cash flow, lowers waste disposal costs, and reduces TransAlta’s environmental footprint.

Scrap Metal Recycling IncreasesRecycling is an important part of closing the sustainability loop and has far-reaching and profitable implications across TransAlta’s enterprise. From fittings, valves, piping, electrical switches to rotors, transformers, tractors and draglines, there’s significant value in the steel, copper, aluminum and other metals, and the heavy equipment that has come to the end of its lifecycle inside TransAlta’s operations.

Leonard Hagen is responsible for TransAlta’s investment recovery program, which sent more than 2,000 tonnes of scrap metal to recyclers in 2014, earning over $200,000. Leonard works across all of TransAlta’s business units: gas, coal, mining, hydro and wind.

He says, “TransAlta’s scrap metal program contributes to a greener environment. Selling equipment that can be reconditioned is another big contribution to a greener world.”

In 2012, Leonard assisted with the marketing of a surplus dragline to an Australian mining company, resulting in a multi-million dollar sale. In 2013, he sold another dragline for 1,500 tonnes of scrap metal value. He’s sold used wind turbines and regularly tenders heavy equipment, like Caterpillar dozers, to clients that prefer to buy and refurbish equipment rather than buying new.

Ensuring that operational sites are kept clear of surplus materials, and responsibly converting scrap metals into other products is a win-win for TransAlta’s bottom line and the environment.


Ramirez Reforestation crew members plant trees in the former Highvale mine (Centralia) area.

ReclamationMining Reclamation in AlbertaReclamation is the process of returning land that has been disturbed for industrial purposes to a condition that supports end-use land planning objectives. TransAlta conducts open-pit mining of coal to support the mine-mouth operations near our Alberta thermal generating facilities. We apply robust reclamation practices that restore lands to a capability equal to or better than before mining began.

In 2013, TransAlta assumed operating and management control of the Highvale Mine, which has been operating since 1970 and is Canada’s largest surface strip coal mine. Currently, five pits are actively licensed and mined. In 2014, TransAlta applied to Alberta Environment and Sustainable Resource Development and the Energy Resources Conservation Board for a license to develop, operate and reclaim a new mine pit (Pit 09) within the Highvale permit boundary. Our application includes a long-term reclamation plan that involves contouring disturbed areas, re-establishment of surface water resource, replacement of topsoils and subsoils and re-vegetation and land management. Reclamation of the first mined out area of Pit 09 is proposed for 2020, and reclamation will be ongoing for the life of the pit.

TransAlta Participates in the Alberta Wetland Compensation ProgramOur participation in the Alberta Wetland Compensation Program forms an important part of TransAlta’s reclamation planning and processes. Wetlands are integral to the landscape and contribute to the biodiversity and ecology of an area. Aside from providing critical wildlife habitat, wetlands help reduce soil erosion, retain sediments, absorb nutrients and store water to moderate impacts of floods and droughts.

The Alberta Wetland Compensation Programs determines that for every hectare of wetland that is disturbed, a minimum of three hectares must be replaced. The 3:1 replacement ratio can be achieved in a variety of ways, from reconstructing wetlands to land donations or a monetary donation to organizations that manage wetlands.

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2014 Sustainability Targets Performance Update

In 2014, we set out to create targets that are measurable, material to stakeholders and longer-term (although we do believe short-term goals remain relevant and help to build longer-term goals). The target setting process involves internal consultation with leaders from the business units responsible for achieving such targets along with executive and board-level engagement and endorsement. In 2014, we had 17 targets, the majority of which were achieved in 2014. We remain committed to achieving these targets not achieved in 2014 in the long term. The following chart is an update on our 2014 targets and how we performed. For each target, we have explained how we performed and if the target was achieved, not achieved or in progress.

Environment

Focus 2014 Target Progress Details

1. Minimize fleet-wide environmental incidents

Keep recorded incidents below 20 in 2014.

Achieved We recorded only 15 environmental incidents.

2. Mine reclamation Strive for annual topsoil replacement at Highvale Mine (74 acres in 2014) and move into monitoring and certification phase at Whitewood Mine in 2014.

Achieved Topsoil replacement of 77.6 acres was achieved at the Highvale Mine. The field work and Alberta Environment and Sustainable Resource Development (ESRD) assessments were completed for the certification phase at Whitewood mine.

3. Maximize byproduct revenue opportunities

Recycle a minimum of 700,000 tonnes in 2014.

Achieved We recycled more than 840,000 tonnes of coal byproduct materials.

4. Waste and energy reduction

Continue to maintain the 80-90 per cent recycling rate of IT waste.

Achieved We recycled 90 per cent of our IT waste and surplus equipment.

Reduce data centre energy consumption by an additional 5-10 per cent in 2014.

Achieved In 2014, we removed several systems and the power savings averaged 5.3 per cent.

5. Reduce avian mortality Evaluate a full year cycle in 2014 to assess the reduction in wildlife mortalities.

Achieved The Soderglen wind farm was retrofitted in 2013 to reduce avian related outages. There have been no avian or wildlife related outages at the Soderglen wind farm over the past twelve month period. Based on this success, two more wind sites (Blue Trail and Summerview I) were retrofitted in 2014 with more planned for 2015. The wildlife protection covers that have been installed include lightning arrestor and cut out covers that insulate the above ground electrical components that pose the greatest electrocution risk for birds.

6. Coal greenhouse gas emission reduction

20 per cent reduction from 2005 levels by 2021 or the equivalent of 7,000,000 tonnes CO2e per year.

InProgress

Our coal related greenhouse gas emissions were 31.7 million tonnes of CO2e which is 12 per cent below 2005 levels. Coal related greenhouse gas emissions increased from the 27.1 million tonnes emitted in 2013, however we are on a pathway to achieving the 2021 and 2030 targets.

55 per cent reduction from 2005 levels by 2030 or the equivalent of 19,700,000 tonnes CO2e per year.

In 2014, we intend to track progress and report against targets in the 2014 Report on Sustainability.


2014 Sustainability Targets Performance Update (continued)

Social


7. Minimize fleet-wide safety incidents

Strive for combined injury frequency rate (IFR) below 1.0 in 2014.

Achieved We achieved a combined (employee and contractor) IFR of 0.86 – the best IFR metric in our corporate history.

8. Continue to develop and foster strong stakeholder engagement

Formalize a corporate framework for stakeholder engagement in 2014.

Achieved A cross functional stakeholder engagement framework (SHEF) internal working group was established in 2014. Working with a third party consultant the working group developed the stakeholder engagement framework including the principles and objectives.

9. TransAlta culture Implement TransAlta

key attributes of: drive for results, leadership, strategic thinking, professional excellence, continuous development and accelerating the organization

The attributes will be embedded into recruiting and performance management for 2014.

InProgress

Attributes have been embedded in the recruitment process via interviewing. For 2015, the attributes will be used to measure performance and delivery of business goals.

Voluntary employee turnover

Maintain turnover under eight per cent in 2014.

Achieved The voluntary turnover rate for fulltime employees choosing to depart TransAlta in 2014 was 6.97 per cent.

Encourage employee volunteerism

Continue to increase by two per cent year over year.

Achieved We achieved an eight per cent increase in volunteer activities from 2013 to 2014.

Maintain top compliance practices and processes

Achieve 100 per cent completion rate of compliance training for trading group.

Achieved 100 per cent of training assigned to the trading group was completed.

Formalize compliance training programs for operational groups.

Achieved Operations Compliance has begun the implementation tasks associated with the risk based training program. As part of that program, new and more sustainable training modules will be developed over 2015.

10. Aboriginal relations

Achieve silver-level accreditation with the Canadian Council for Aboriginal Business (CCAB) in 2015.

Achieved We achieved a silver-level designation in the CCAB Progressive Aboriginal Relations (PAR) certification program in 2014. PAR Silver companies are those who support the sustainability of Aboriginal populations through investment in communities and people.

11. Environmental management system (EMS)

Finish implementation of corporate framework to support ISO 14001 across business units in 2014.

InProgress

In 2014, our corporate environment, health and safety (EH&S) team conducted a high-level gap assessment against the internationally recognized ISO 14001 and OSHAS 18001 management system standards. This review process resulted in the proposal of 15 new Corporate EHS Management System Elements to address gaps in the EHSMS framework. In 2015, these elements will be communicated to the organization with an implementation plan developed, targeting full implementation across the fleet by January 2017.


1 See pages 16 of the March 2014 TransAlta Investor Presentation. 2 See page 50 of the TransAlta 2013 Annual Report.3 See page 16 of the TransAlta 2014 Annual Report.4 See page 18 of the TransAlta 2014 Annual Report.

Economic


12. Maintain our investment grade rating

Continue to maintain our investment grade credit rating.

Achieved TransAlta strives to maintain an investment grade credit rating. Current debt ratings are as follows: Fitch: BBB- (stable), rating report released on January 8, 2015; S&P: BBB- (stable), rating report released on April 25, 2014; DBRS: BBB (stable), rating report released on March 10, 2014; Moody’s: Baa3 (negative), rating report released on March 7, 2014.

13. Grow shareholder returns and increase focus on funds from operations (FFO)

Grow EBITDA by an average of $40-$60 million per year and achieve $743-$793 million in FFO in 2014.1

Achieved For the year ended December 31, 2014, comparable EBITDA was $1,036 million, up $13 million from 2013. For the year ended December 31, 2014, FFO was reported at $762 million, in-line with our target and up from $729 million in 2013.3

14. Achieve top quartile performance within the industry

Deliver 88-90 per cent availability2 while achieving second quartile operating costs.

Achieved We achieved adjusted availability in 2014 of 90.5 per cent, compared to 87.8 per cent in 2013. This is our strongest fleet availability since 2003 and is higher than our long-term target of 88-90 per cent. The availability is adjusted for economic dispatch at Centralia.4

15. Operational optimization

Deliver a minimum of $10 million of incremental cash flow from fleet-wide operational improvements in 2014.

Achieved We entered into an agreement with Alstom to provide major maintenance for 10 major maintenance projects over the next three years at our Keephills and Sundance plants. The new arrangement is expected to deliver an average 15 per cent cost reduction per turnaround and shorter turnaround times for major maintenance work, resulting in estimated direct cost savings of $34 million over the full term of the agreement.

Comprehensive


16. Reporting Improve internal TransAlta engagement on sustainability, specifically around Carbon Disclosure Project (CDP) and Dow Jones Sustainability Index (DJSI).

Achieve Canada’s CDP top 20 for carbon disclosure and listing on the DJSI World Index in 2014.

PartlyAchieved

We improved and broadened our engagement with internal stakeholders for both the CDP and DJSI submissions.

We achieved a DJSI score of 75, which was above the DJSI North America Index inclusion threshold but below the 81 point threshold required to obtain listing on the DJSI World Index. Due to market capitalization limits, TransAlta is no longer eligible for the North American Index and we have decided to re-valuate our participation in the annual survey. In 2014, only one North American utility company was able to achieve the DJSI World Index. In 2015, TransAlta will use the DJSI survey to guide the prioritization of internal sustainability improvements.

TransAlta’s CDP score improved from 78 to 85 year over year. The score was the highest score earned by any of the companies in the Canadian electric utilities sector. We did not achieve Canada’s top 20, but did rank in Canada’s top 40.

17. Supply chain management (SCM)

Adjust supplier selection processes to include additional sustainability criteria in 2015.

Achieved In 2014, we created a “Social, Economic and Environmental Sustainability” and a “Sustainability Survey” as optional clauses for use in our standard purchase order terms and conditions. In 2015, similar changes will be implemented into our standard RFP template and terms and conditions for supplier agreements.


2015 and Long-Term Sustainability Targets

In 2015 and beyond, we are focused on aligning targets with our indicators: the areas of key concern to our stakeholders. We’re attempting to set targets that are measurable, long- term and with a macro focus. After all, sustainability is about the long-term. We’re not shying away from shorter-term targets; we still have short-term sustainability to consider and these remain good indicators of how we’re performing from year to year.

Environmental HighlightsWe have added longer-term targets related to our NOx and SO2 emissions and coal byproducts for 2015 and beyond. Our NOx and SO2 commitment will see us reduce NOx and SO2 emissions from coal by 95 per cent by 2030 (compared to 2005 levels). Over the course of the next three years, we plan to recycle a minimum of two million tonnes of coal byproducts (specifically fly ash, bottom ash, gypsum and cenospheres).

We have removed our energy management target from 2014, which was a micro target (IT focused), and we’re exploring setting a longer-term macro target. We removed our avian mortality target from our wind fleet as this was achieved and although removed, we are still applying this technology to new areas of our wind fleet. This was replaced with a target to promote biodiversity by installing bird and bat habitats at our wind facilities in 2015. With the avian mortality program successfully moving ahead, our Wind team believes that habitat creation is a more pressing sustainability target in the short-term.

Social HighlightsOur aboriginal target has been revised to a longer-term target after achieving silver Progressive Aboriginal Relations accreditation. We are now diligently working towards gold accreditation.

We continue to encourage and create opportunities for employee volunteerism in our communities.

Economic HighlightsWe have replaced our economic Operational Optimization target with a target that aligns better with our business strategy – to grow our asset portfolio by $40-$60 million of EBITDA annually. Achieving economic sustainability is a core focus of business strategy at TransAlta given the continued low electricity price environment in Alberta.

The table on page 15 highlights our 2015 and longer-term targets.

Don Wharton, TransAlta’s vice-president, policy and sustainability, explains that, “Articulating sustainability targets is a healthy exercise and has helped promote broader engagement about sustainability across our company. It’s also a journey and we continue to refine our sustainability targets to make them better, sharper and more sustainable.”


Environment

Focus 2015 and Longer-Term Actions

1. Minimize fleet-wide environmental incidents

Keep recorded incidents (including spills and air infractions) below 18 in 2015, which is a 10 per cent improvement over the 2014 target.

2. Mine reclamation Maintain annual topsoil replacement rate at Highvale Mine of 74 acres/year.

3. Maximize byproduct revenue opportunities

Recycle a minimum of two million tonnes of coal byproduct materials during the period 2015 to 2017.

Recycle 2,000 tonnes of scrap metal materials in 2015.

4. Promoting biodiversity Install bird and bat habitat improvements at Alberta wind facilities in 2015.

5. Air emissions management A 95 per cent reduction from 2005 levels of TransAlta coal facility NOx and SO2 emissions by 2030.

A 20 per cent reduction from 2005 levels by 2021, or the equivalent of 7,000,000 tonnes of CO2e per year.A 55 per cent reduction from 2005 levels by 2030, or the equivalent of 19,700,000 tonnes of CO2e per year.

6. Water management Enter into a permanent agreement with the Government of Alberta to manage water on the Bow River to aid in potential flood mitigation in 2016.

Complete third party assurance of TransAlta water consumption and discharge in 2015.

7. Environmental management systems (EMS)

Successfully self-audit each wind operations site against the Operations Environmental Management Plans created in 2014.

Social8. Minimize fleet-wide safety incidents Strive for combined IFR below 0.90 in 2015, which is a 10 per cent improvement over the

2014 target.9. Stakeholder engagement The TransAlta Stakeholder Engagement Framework (SHEF) implementation plan will be finalized

in the first half of 2015, which will be followed by the completion of short-term SHEF actions such as internal stakeholder mapping. Full implementation of the SHEF will be completed in 2016.

10. Community involvement Increase by two per cent the number of company sponsored volunteering opportunities in 2015.11. Human Resources Maintain a voluntary turnover percentage under eight per cent in 2015.

Achieve 100 per cent completion of development plans for all high potential employees at the top three levels of the organization in 2015.

Maintain a 100 per cent completion rate on new hire onboarding.

Recruit and fill vacant positions within 50-60 days.

12. Aboriginal relations In 2015, TransAlta will increase the quantity and quality of engagement with its First Nation communities by improving internal systems that will allow for feedback and tracking of engagement activities. By 2017, TransAlta is targeting to achieve gold-level designation in the CCAB Progressive Aboriginal Relations (PAR) certification program.

Economic13. Maintain our investment grade rating Continue to maintain our investment grade credit rating.14. Increase focus on funds from operations (FFO) and EBITDA

TransAlta Corporation targets comparable EBITDA and FFO for 2015 in the range of $1,000-$1,040 million and $720-$770 million respectively.1

15. Grow asset portfolio Deliver an average of $40-$60 million of additional EBITDA from growth projects.2

16. Achieve top quartile performance within the industry

Continue to deliver 88-90 per cent availability.3

17. Customers Grow our offering of products and services to Alberta electricity consumers as the Alberta Power Purchase Arrangements (PPAs) expire to match customer power needs with TransAlta’s competitive generation.

Comprehensive18. Reporting Achieve year over year improvement in Carbon Disclosure Project (CDP) by scoring a 90 or

greater in 2015.19. Supply chain management (SCM) In 2015, make available sustainability clauses for optional inclusion into standard TransAlta

request for proposal (RFP) template and terms and conditions for supplier agreements.

1 See page 55 of the TransAlta 2014 Annual Report.2 See page 5 of the March 2015 TransAlta Investor Presentation.3 See page 27 of the TransAlta 2014 Annual Report.

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