unlocking sustainable value - transalta

Unlocking Sustainable

Value

Report on Sustainability 2014

Sustainability @ TransAlta 1TransAlta in 2014 2Materiality 4Message from Dawn Farrell, President and CEO 6Message from the Chair 102014 Sustainability Targets Performance Update 112015 and Long-Term Sustainability Targets 14Corporate Governance 16

Economic Sustainability 18Economic Performance, Market Presence and Growth 19Energy Reliability & Affordability 24Anti-Competitive Behaviour 28

Environmental Sustainability 30Managing Emissions 31Environmental Management 33Biodiversity Management 34Water Management 36Waste Management 38Reclamation 41

Social Sustainability 42Health, Wellness & Safety 43Stakeholder Relations 46Aboriginal Relations 47Community Involvement 49Human Resources 51

Our Diverse Mix of Energy: 2014 Fuel Highlights 54Coal 56Natural Gas 57Hydro 58Wind 59

About this Report 60Independent Limited Assurance Statement 62Performance Indicators 64Discussion and Notes on Numbers 68

1TransAlta Corporation | 2014 Report on Sustainability

Sustainability @ TransAlta

2015 marks the 21st consecutive year TransAlta has published a sustainability report.

We are pleased to share this annual update on our environmental, social and economic progress. It reflects the sincere e�ort and strategic innovation that supports sustainable thinking, commitment and action across our company.

TransAlta’s goal is to drive profitable growth through our low-cost, competitive power products and services, our reliable, responsible operational performance, and our exemplary customer focus.

Cultivating a continued, two-way dialogue with you, our stakeholders, about our sustainability record, is an important part of our sustainability commitment.

In addition to the information found in this report, please visit our website at www.transalta.com/sustainability to learn more about our projects, practices and progress throughout the coming year.

Unlocking Sustainable

Value

Report on Sustainability 2014

TransAlta. Our People. Our Values. Our employees feel strongly about the values of TransAlta and work hard every day.

https://www.youtube.com/watch?v=1t_CxbVOGYE

2 TransAlta Corporation | 2014 Report on Sustainability

TransAlta in 2014

We own, operate and manage a highly contracted and geographically diversified portfolio of 64 generating facilities that use a variety of fuels, including coal, natural gas, hydro, and wind. In 2014, TransAlta’s net generating capacity was 8,707 MW and we generated 45,002 GWh of electricity.

TransAlta Corporation’s shares trade on the Toronto Stock Exchange under the symbol TA and on the New York Stock Exchange under the symbol TAC. TransAlta Corporation’s preferred shares trade on the Toronto Stock Exchange under the symbols: TA.PR.D, TA.PR.F, TA.PR.H. and TA.PR.J. At close of business on March 31, 2015, there were 227 million common shares issued and outstanding and to the knowledge of our directors and o�cers, no person beneficially owns, controls or directs more than 10 per cent of our common shares. The March 31, 2015, closing price of TAC was $11.75.

TransAlta Corporation’s subsidiary, TransAlta Renewables Inc., provides investors with the opportunity to invest directly in a highly contracted portfolio of low carbon power generation facilities. TransAlta Corporation retains control over TransAlta Renewables Inc. As a result, any loans outstanding or transactions between TransAlta Corporation and TransAlta Renewables Inc. are eliminated on consolidation in our financial statements. TransAlta Renewables Inc. shares trade on the Toronto Stock Exchange under the symbol RNW. At close of business on March 31, 2015, there were 115 million common shares of TransAlta Renewables Inc. issued and outstanding. The March 31, 2015 closing price of RNW shares was $12.55.

Report ProfileTransAlta’s 2014 Report on Sustainability covers the reporting period from January 1, 2014 to December 31, 2014. The report is inclusive of both TransAlta Corporation and TransAlta Renewables Inc. TransAlta publishes our Report on Sustainability annually, in print and on our website.

Net Ownership Capacity (%)

CoalNatural GasRenewables

18

25

57

25%RenewablesCapacity (MW)in TransAlta’s Portfolio

Organizational Profile

TransAlta Corporation, headquartered in Calgary, Alberta, is one of Canada’s largest publicly traded power generators and marketers, and the sponsor and majority owner of TransAlta Renewables. TransAlta owns assets strategically positioned in Canada, the United States and Australia. The goal shared by our more than 2,600 employees is to provide reliable, competitive power to our customers in a responsible, sustainable way.


32.2 / 7.4 / 5.4

Generation by Type (million MWh)

201420132012

28.3 / 7.9 / 6.324.0 / 8.2 / 6.5

CoalNatural GasRenewables

45,002

Annual Electricity Production (GWh)

201420132012

42,88238,750

Environmental and social data in this report covers the scope of the facilities in which we are the operator (61 of 64 facilities or 95 per cent). Production and economic data follows the scope of our financial ownership in all facilities (64 facilities, but equity ownership varies). All dollar amounts are presented in Canadian currency unless otherwise stated. TransAlta currently reports our greenhouse gas (GHG) emissions based on The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard. We report on an Operational Control basis, which includes GHG reporting on the plants in which we are the operator.

This is TransAlta’s 21st Report on Sustainability. Data and content in this report are guided by both the Global Reporting Initiative (GRI) and the International Integrated Reporting Council (IIRC) Integrated Reporting Framework. We continually aim to improve reporting as guided by best practice. In 2014, we completed our first materiality assessment (page 4). Behind the scenes, we are striving to align our sustainability and financial reporting. We believe this will deliver a more fulsome overview for investors to evaluate risk and opportunity associated with their investment dollars. We also continue to support annual investor requests/benchmarking (Corporate Knights and Carbon Disclosure Project (CDP)), review feedback from stakeholders and take action on the recommendations made by our assurance provider.

Soderglen wind farm, Alberta.


Materiality

Reporting on What Matters to YouTransAlta is committed to continuous sustainability reporting improvement. In 2014, we used a materiality assessment to inform the content areas of our 2014 Report on Sustainability. Materiality reflects an “organization’s significant economic, environmental and social impacts” (GRI), that “substantively a¤ect the organization’s ability to create value over the short, medium and long term” (IIRC). What is material is identified by a materiality assessment. A materiality assessment identifies areas of key concern for stakeholders, industry specific and company specific.

TransAlta’s materiality assessment was a weighted assessment based on findings from the Global Reporting Initiative – Energy and Energy Utilities materiality findings; the Governance and Accounting Institute’s (Sustainability – ‘What Matters’) Energy and Energy Utilities and ALL Sector materiality findings; the Electric Power Research Power Institute environmental, social and economic materiality findings; the Sustainability Accounting Standards Board coal operations materiality findings; and the Dow Jones Sustainability Index core categories.

reflects an “organization’s significant economic, environmental and social impacts.”

Calgary skyline, Alberta.

We’ve been on the right track with reporting in the past, but our findings have helped us prioritize content and identify additional areas to report on, areas that are of concern to you, our stakeholders.

Oliver Bussler, TransAlta’s director, sustainability, says, “Prioritizing the topics we cover in our Report on Sustainability, so that they align with what our stakeholders want to know, is an important step forward and one we intend to continue to leverage, through the development of a new stakeholder engagement framework that will be formalized in 2015.”

Our top 25 indicators, which informed content of this report, are listed on the following page. If you have any feedback for us, we’d always like to hear from you. Email us at [email protected] or follow us on twitter @TransAlta.

https://twitter.com/hashtag/transalta


The following indicators were highlighted through our materiality assessment process.Please refer to the associated page number for reported content on each indicator.

Top 25 Indicators1. Greenhouse gas emissions page 31

2. NOx, SO2 and other air emissions page 31

3. Direct economic performance, viability and market presence page 19

4. Managing impacts on biodiversity page 34

5. Total number and volume of significant spills page 33

6. Occupational health and safety page 43

7. Environmental management page 33

8. Labour practices and decent work page 53

9. Public health and safety page 45

10. Water management and risk page 36

11. Energy reliability page 24

12. Regulatory compliance page 28

13. Operational eco-efficiency page 27

14. Talent attraction, retention and human capital development page 51

15. Anti-competitive behaviour page 28

16. Corporate governance page 16

17. Community support and economic development page 49

18. Waste management page 38

19. Habitats protected or restored page 41

20. Total water withdrawal page 36

21. Total water discharge page 36

22. Significant fines for non-compliance with laws and regulations page 33

23. Aboriginal relations page 47

24. Energy affordability page 24

25. Customer relationship management page 26


Message from Dawn Farrell, President and CEO

This is TransAlta’s 21st sustainability report. Some may ask why we produce an annual accounting of our sustainability performance. Given the resources required, it’s a fair question – and one we first considered more than two decades ago when we started to see the initial shift towards sustainable thinking and heightened stakeholder expectations for disclosure beyond the balance sheet. Essentially, for us, the decision boiled down to this: Would sustainability reporting make us more competitive? And, if so, were we prepared to be anything other than leaders in our industry? The answers to both questions were clear.

Sustainability Makes Good Business SenseAt TransAlta, we believe it makes good business sense to share our sustainability story. First, because we have a great story to tell, and second, because like many other companies that participate in the energy industry, our sustainability and business strategies are essentially one and the same. The setting of ambitious financial, social and environmental objectives, followed by the close tracking of our performance in each of these areas, continuously pushes our company to improved performance. We believe this is one of our competitive advantages – and that success in one area is ultimately important to success in the others. At the same time, this reporting enables us to continue to earn the public trust, strengthen relationships with stakeholders and renew our social license to operate. So, in our minds, there’s no question that providing transparency about the decisions we make with regards to social and environmental matters is well worth the time and e¤ort it takes.

As I indicated in last year’s report, TransAlta will further elevate our reporting next year by taking an integrated approach to our financial and sustainability reporting. We decided to take this next step to truly reflect the ongoing intersection of the three pillars of sustainability (the social, environmental and financial) in our business and our decision making. We are developing a plan for implementing this change and are on track to introduce our annual integrated report in 2016.


Electricity is an Essential Component of Modern Day LifeAs a large and diversified power generator active across Canada, in the U.S. and in Australia, TransAlta’s core business touches thousands of stakeholders. Our product is essential to economic growth and viability, and provides the basis on which individuals, communities and countries work, grow and prosper. The electricity we generate today powers large industrial customers, commercial enterprises, small businesses, homes, cars, laptops, phones and so many other devices indispensable within our everyday lives. We appreciate how vital our product is to our customers, and we also understand the far reaching implications that result from decisions we make about the fuels we use, the plants we run, the safety and operational standards we uphold and the manner in which we interact with our employees, neighbours, customers, regulators and business partners.

Sustainability Feeds InnovationAt TransAlta, we are also in the business of improvement. Whether it’s finding a more efficient way to do something, discovering a new more affordable technology, improving the safety of our operations or minimizing our environmental footprint, we are always looking to do better. We know that it is through investment in new technologies, systems, processes and training that we will ensure our ongoing success and sustainability. In 2014, we made some new strides.

One of these was the commissioning of our coal fines plant at Centralia, which recovers the coal from coal fines (small particles of coal and clay that remain following coal washing) for burning in the Centralia plant. This innovative solution will enable us to clean, reuse and recycle the four million tonnes of slurry material, which is currently stored at the mine, generating revenue in the process.

Employees Embrace SustainabilityIn 2014, TransAlta’s employees led the way when it comes to sustainable practices, delivering the company’s best ever safety performance, contributing record volunteer hours in our communities, partnering with Light Up The World and travelling to Peru and continuing to donate generously to charitable organizations.

At TransAlta, we take great pride in our ability to keep the people on our sites safe, and our employees and contractors continue to deliver best-in-class safety results. In 2014, we achieved the lowest injury frequency rate in our company’s history. Our outstanding performance demonstrates that our safety programs are working effectively, and safety awareness and practices are becoming even more firmly embedded in the hearts and minds of everyone who works at TransAlta. This is a significant achievement, and I would like to personally thank the employees of TransAlta for holding themselves to such a high standard with regards to health and safety and the protection of everyone who works on our sites.

As a large and diversified power generator active across Canada, in the U.S. and in Australia, TransAlta’s core business touches thousands of stakeholders. Our product is essential to economic growth and viability, and provides the basis on which individuals, communities and countries work, grow and prosper.

“


We’re not done yet. As we move ahead in 2015, we are continuing to build on our success by refining our policies and performance with a new program that further entrenches best-in-class process safety practices across our business. As always, ensuring the well-being of everyone on our sites continues to be our number one value.

Our employees also led the way with efforts to strengthen communities throughout Alberta, the U.S., Australia and beyond. We strive to make every community in which we operate better as a result of our presence, and we are pleased that, once again, TransAlta employee contributions surpassed the previous year’s contribution for United Way, approaching one million dollars. United Way is one of our flagship charities and we are proud to play a role in the resourceful community-building efforts this organization promotes.

Our employees formed a unique partnership in 2014 with Calgary based Light Up The World (LUTW). LUTW implements projects that provide sustainable energy solutions and lighting to communities without connection to the electrical power grid. A group of nine employees volunteered their time with LUTW in a remote region of Peru, successfully installing small solar power systems in homes and witnessing first-hand the connection between economic development and electricity. It was naturally a growing and humbling experience for the group. In May of 2015, a second group of TransAlta volunteers are off to Peru.

Connecting to CommunitiesIn addition to the work our employees perform in communities, TransAlta takes a proactive approach to stakeholder consultation and relationship building that includes actively listening to stakeholder concerns, working to minimize operational impacts and being the best neighbour we can be.

In 2014, we were delighted to receive recognition from the Canadian Council for Aboriginal Business (CCAB), which presented our company with a Silver Level Progressive Aboriginal Relations (PAR) Award. The CCAB highlighted TransAlta’s efforts to develop practical, inclusive and creative opportunities for Aboriginal participation in our power developments.

Unlocking Sustainable ValueStewardship and value delivery were important areas of focus for TransAlta in 2014. In the face of low electricity pricing in two of our key markets, we demonstrated that we could deliver on our financial objectives with disciplined management of our operations. We introduced a number of operational efficiency initiatives across our generating fleet and achieved significant improvements in the availability of our Canadian coal plants. These improvements led to both higher cash flow and lower operating costs, which were key factors in helping us reach our financial targets.

At TransAlta, we take great pride in our ability to keep the people on our sites safe, and our employees and contractors continue to deliver best-in-class safety results. In 2014, we achieved the lowest injury frequency rate in our company’s history.

“


At the same time as we were working hard to get the best performance out of our current fleet in 2014, we also made significant progress on many of our growth projects, achieving exceptional momentum. We made solid headway on the regulatory permitting process for Sundance 7, an 856 megawatt (MW) combined-cycle natural gas-fired generating facility currently before Alberta regulators, and are seeing a need for this additional generation in Alberta near the end of this decade. We also advanced our Australian business, winning the contract to build our new 150 MW gas-fired South Hedland power station in Western Australia. Now under construction, we expect this facility to be operational in 2017, further reinforcing our strength in this growing power market.

In 2014, we began construction on the Fortescue River Gas Pipeline in Western Australia with our joint venture partner DBP Development Group, and commissioned it in March 2015. It is both TransAlta’s first pipeline and the longest gas pipeline built in Western Australia in the past ten years. It is now delivering gas to TransAlta’s Solomon power station, which services Fortescue Metals Group’s mining operations at the Solomon Hub. The pipeline allows our Solomon power station to operate on natural gas instead of diesel, improving the station’s reliability and e�ciency.

A Lower Emissions FutureAs we move into 2015 and beyond, TransAlta is continuing the important work of transitioning our generating portfolio in preparation for the expiration of our Alberta Power Purchase Arrangements beginning in 2018 and extending through 2030. Our company will continue to play a key role in the larger transition of Alberta’s electricity sector from coal-fired generation to less carbon intensive electricity production, and we have many strategic options available to us as we work to continue to meet federal and provincial environmental regulations. Some of these options include investing in life-extensions for our coal plants (such as through carbon capture and storage retrofits), converting baseload coal plants to low-cost gas peakers or investing in additional renewable generation in the province.

Today, TransAlta is Canada’s largest publicly traded wind generator with over 1,100 MW of wind across Canada and an additional 144 MW in the United States; we are a 100-year builder, owner and operator of hydroelectric power plants; and we are an owner and operator of natural gas-fired generating facilities in several geographies. With our broad and extensive experience in power generation, we stand ready to make the right decisions and strike the right balance in our diverse generating portfolio for both our investors and our other significant stakeholders as we move forward into the future. As we do so, we will continue to optimize the value from our coal facilities as they approach end-of-life in the coming decades.

I invite you to read more about the innovation and sustainable practices we are applying to electricity generation in the pages that follow. Our company takes pride in providing transparency about our decisions, holding ourselves to high operating standards, building strong relationships with stakeholders, recycling and eliminating waste, innovating to reduce the environmental impact of our operations, protecting wildlife and thoroughly reclaiming the lands we use. I can assure you the pillars of sustainability inform every business decision we make at TransAlta. We recognize that considering these matters and their intersections – whether financial, social or environmental – is essential to growing a strong and healthy business for the long term. It’s simply how we plan, work and think.

Sincerely,

Dawn L. FarrellPresident and CEOApril 22, 2015

Please take our online survey.transalta.com/sustainability/feedback

http://transalta.com/sustainability/feedback


Message from the ChairFor more than two decades, TransAlta’s Report on Sustainability has provided our company with a rigorous annual opportunity to assess our performance across the three pillars of sustainability – economic, environmental and social.

It’s proven to be a value-adding endeavour, as it provides an objective, data-driven framework, based on global reporting standards and best practices, on which we evaluate our accomplishments and challenges, as well as strategies and targets for continuous improvement.

Our Report on Sustainability is also increasingly valuable to our many stakeholders, who are not simply interested in the financial performance we deliver, but who share a legitimate interest in the way we conduct our business. The environmental and social dimensions of our operations are important indicators of TransAlta’s values and the commitment we have to applying innovation and vision to our future growth.

We are proud of the progress we’ve made in 2014 and I encourage you to share your feedback on our Report on Sustainability and our initiatives – through our on-line survey or through questions at our annual meeting.

Sincerely,

Ambassador Gordon D. Gi�nChairman of the BoardApril 22, 2015

Wolfe Island wind farm, Ontario.


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.

TransAlta Corporation | 2014 Report on Sustainability16

Corporate Governance

Sustainability Starts with Good GovernanceAn enlightened, forward-thinking approach to governance is critical to advancing sustainability inside corporations. At TransAlta, we believe good governance is the foundation of our success.

TransAlta’s Board of Directors is responsible for the governance of our company. These experienced business leaders provide oversight, create key policies and standards, further our strategic planning process and monitor how well management performs against our strategy.

Board Committee ResponsibilitiesTransAlta’s Standing Committees of the Board of Directors includes the Audit and Risk Committee, the Human Resources Committee and the Governance and Environment Committee. Charters for each committee are available on our website at www.transalta.com/about-us/governance/board-committees. Independent directors form the membership of each standing committee.

The Governance and Environment Committee of our board provides oversight to environment, health and safety (EH&S) practices, procedures and policies as established by management in relation to legal/regulatory and industry standards or best practices. The Committee reviews EH&S performance, receives regular updates on environmental policy and regulatory developments and reviews strategy questions related to TransAlta’s sustainability goals every quarter.

Alan J. Fohrer Karen E. Maidment

William D. Anderson John P. Dielwart Dawn L. Farrell

P. Thomas Jenkins C. Kent Jespersen Michael M. Kanovsky

Ambassador Gordon D. Giffin

Yakout Mansour Georgia R. Nelson

Timothy W. Faithfull

Dr. Martha C. Piper


Applying Best Practices TransAlta takes our commitment to being a responsible corporation very seriously and works to demonstrate transparency and best practices in corporate governance in all that we do. In 2014, TransAlta’s Board of Directors came first for diversity in the Global Governance Advisors Survey, conducted by the Calgary Herald, of the 100 Top Calgary companies by market capitalization.

TransAlta’s corporate governance practices meet or exceed the standards set out in the Canadian Securities Administrators’ Multilateral Instrument 52-109, Multilateral Instrument 52-110 and the corporate governance standards and disclosure requirements in Canadian Securities Administrators’ National Policy 58-201 and National Instrument 58-101.

In addition, our corporate governance practices comply with applicable requirements of Sarbanes-Oxley, including any U.S. Securities and Exchange Commission rules initiated under Sarbanes-Oxley.

Ethics in ActionTransAlta’s business reputation is a valuable asset – one we continually work to steward and protect, by promoting company-wide awareness of the high ethical conduct and business behavior standards expected of our employees, officers and directors. We first developed a written code of conduct document in 2001. Every year, as a condition of employment, we require employees and officers to review the document and confirm their compliance with the conduct guidelines. In addition, we have developed more specific code of conduct documents for members of our Board of Directors, financial employees and for those engaged in energy marketing. This annual review of our corporate conduct standards provides employees with the opportunity to refresh their knowledge, ask questions and ensures any issues or concerns they have are addressed.

Reporting ConcernsTransAlta’s board, through the audit and risk committee, provides options for employees, contractors, shareholders and other stakeholders to report concerns regarding any potential ethical violations, or any other matters they wish to bring to the attention of the board.

Reporting options include:

• An email to the ethics help line at [email protected]; or

• A fax addressed to the Director, Internal Audit, at the confidential fax line 403-267-7985; or

• A confidential, anonymous voicemail on the TransAlta ethics help line at 1-888-806-6646; or

• Mail addressed to: Director, Internal Audit or Chair of the ARC, Subject Matter “003”, TransAlta Corporation, 110 - 12th Avenue SW, Calgary, Alberta, T2P 2M1.

Ongoing EducationThe Institute of Corporate Directors (ICD) is a national organization dedicated to promoting the continuing education of directors and enhancing the overall level of governance in Canadian companies. TransAlta’s board is a member of the ICD.

TransAlta provides presentations and tours to enhance director knowledge of our principal operations and the communities in which we operate. Directors also regularly participate in information learning sessions from TransAlta’s management and independent electricity industry experts.

Our Corporate Code of ConductTransAlta’s corporate code of conduct provides employees with clear information on the company’s expectations concerning appropriate behavior and professionalism in the workplace and is an important part of our corporate governance framework.

All TransAlta employees, including senior management and members of the Board of Directors, are required to sign off on the code every year. This process also provides an opportunity for employees to raise any issues or concerns they may have.

TransAlta maintains a confidential ethics helpline to provide employees with assistance in assessing concerns they may have related to issues such as vendor relationships, possible conflicts of interest and the proper use of company resources. A toll-free number, email and fax contact options are provided. All potential code of conduct breaches are reviewed by the director of internal audit and are resolved on an individual basis.

In 2014, TransAlta advanced our growth prospects, improved the performance of our generating assets and leveraged our strength in renewables.

EconomicSustainability

The Solomon facility is part of TransAlta’s growing presence in Western Australia.

18


$40-60million EBITDA/year Go Forward Growth Target

64Power Generating Facilities in Canada, the Western U.S. and Australia

Every year, TransAlta adds value to our bottom line by generating and selling o�sets earned by our wind assets. These o�sets are available for TransAlta to apply against the GHG emissions we generate, and to create additional cash flow. TransAlta also benefits from the sale to customers of the Eco-Logo TM

certified Renewable Energy Certificates (RECs) that come from our hydro and wind facilities.

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Economic Performance, Market Presence and GrowthTransAlta’s key priorities in 2014 focused on unlocking value through operational excellence; strengthening our financial position; and growing our portfolio of assets by delivering an average of $40-$60 million of additional earnings before interest, taxes, depreciation and amortization (EBITDA).

In 2014, TransAlta generated funds from operations of $762 million and comparable EBITDA of $1,036 million, respectively increasing $33 million and $13 million over our 2013 performance. Although we did not achieve $40-$60 million in 2014 of additional EBITDA, our improved financial results were achieved against a backdrop of continued low electricity prices.

One way that operational excellence creates value is through the continuous, uninterrupted running of generating facilities. In 2014, TransAlta’s fleet achieved an adjusted availability factor of 90.5, a 3.1 per cent increase over 2013 adjusted availability. We also captured opportunities to reduce operating costs, which further strengthened the financial performance of these facilities.

In 2014, TransAlta’s energy marketing group delivered a strong performance and we increased our electricity volumes to commercial and industrial customers by 12 per cent.

SustainableDividend

Sustainability Targets See page 13

Follow us on Twitter

According to the AESO the demand for electricity in Alberta will grow by 2.5 per cent for the next 20 years.

https://www.youtube.com/watch?v=VtPuEORGaTE



Economic Update and ViabilityTransAlta recognizes that stable investment grade credit ratings, prudent debt levels and free cash flow are key to our ability to act on profitable growth opportunities as they arise.

Every year, TransAlta’s business development specialists analyze upwards of 150 potential business deals in a continuous quest to find low-risk, long-term contracted assets that fit our generating portfolio. We review investment opportunities in our key operating geographies and look for projects that are immediately accretive.

Going forward, TransAlta’s continued growth will come from our ability to maintain a highly contracted, low-cost and diverse portfolio of electricity assets. Dean Luciuk, TransAlta’s vice-president, business development, says, “We see gas-fired generation growth as the most cost-eective means of generation for the power grids we’re looking at. Our focus is on serving industrial customers who need complete power solutions.” Those customers are found in the oil and gas, liquefied natural gas (LNG), forestry, potash, chemicals, agricultural and mining sectors – all require reliable, cost-e¤ective and environmentally friendly electricity.

In 2014, TransAlta’s generating portfolio was 43 per cent gas and renewables and the transition from coal towards less carbon intensive fuel types will continue.

Delivery of one of the turbines used in TransAlta’s gas-fired plants.

Canadian CoalU.S. CoalGasWindHydroEnergy Marketing

309

177

8576

386

62

TransAlta’s Comparable EBITDA by Business Unit 1

($ Millions)

1 The total reflects corporate business unit costs of $59 million.

Powering industry in Western Australia.

https://www.youtube.com/watch?v=F5GikmkOV5U


TransAlta employee Frank Hockley on site during South Hedland construction.

TransAlta Wins South Hedland, Australia Gas Plant ContractAustralia’s mining industry requires significant amounts of electricity to power its vast mineral extraction and refining operations. TransAlta has participated in this lucrative power market since 1996 and has built 425 MW of “behind-the-fence” gas-fired power plants for large mining customers. In 2014, TransAlta successfully bid for and was awarded the contract to build, own and operate the South Hedland Power Station Project.

The 150 MW combined cycle power station will be located in the Pilbara region of Western Australia and will be one of the most e�cient gas-fired generating plants operating in the region. The facility, which is expected to come online in 2017, will be contracted under long-term power purchase agreements (PPAs) to supply Horizon Power, the state energy utility serving residential and commercial customers, as well as Fortescue Metals Group, an iron ore mining company.

Aron Willis, TransAlta’s vice-president, Australia, says, “The South Hedland power plant is the first piece of shared electricity infrastructure in the Port Hedland area and will oer both local residents and commercial customers more e�cient and competitively priced electricity.“

TransAlta’s knowledge of the Australian market, previous on-the-ground experience, proactive stakeholder relations and ability to work creatively to satisfy both public utility and industry requirements were key factors in the successful bid.

Aron says, “The Australian market contributes 16 to 17 per cent of TransAlta’s earnings before interest, taxes, depreciation and amortization (EBITDA) and solidifies this market as a core region for our company.”

Growth in our Australia operations continues with the construction of our South Hedland power station.

https://www.youtube.com/watch?v=X6FiMKsjZTs


Fortescue River Gas Pipeline JV Progress In 2014, TransAlta Corporation formed a joint venture with DBP Development Group (DDG) to build, own and operate the Fortescue River Gas Pipeline project. The 270 kilometre, 16-inch pipeline connects the Dampier Bunbury Natural Gas Pipeline to TransAlta’s dual-fuel Solomon Power Station in the Pilbara region.

Located in Western Australia’s Pilbara region, the Fortescue River Pipeline is the longest gas pipeline built in the area over the past decade and will enable TransAlta’s Solomon Power station to run on natural gas, rather than diesel fuel, improving reliability and reducing both emissions and operating costs.

The project, TransAlta’s first pipeline, was completed within a nine month timeframe for an estimated total cost of AUD $183 million. It will deliver gas to our Solomon power station, which services Fortescue Metals Group mining operations at the Solomon hub.

Construction of the Fortescue River Gas Pipeline.

“The Fortescue River Gas Pipeline is the longest gas pipeline built in Western Australia in the past ten years and we are excited about future growth possibilities. The completion of the pipeline provides an opportunity for future expansion in the Pilbara region and is consistent with TransAlta’s strategy of growing in its core regions and diversifying its cash flows,” says Dawn Farrell, President and CEO of TransAlta. “Thanks to our partner for a well-run project, which was completed with an excellent safety and environmental record. Our focus now shifts to safe, reliable operation of the asset over the long term.”

Sundance 7 Advances Stakeholder Consultation Process TAMA Power, a partnership between TransAlta and Berkshire Hathaway Energy (formerly MidAmerican Energy Holdings Company) is pursuing opportunities to build reliable, economical and environmentally responsible natural gas fuelled power generation facilities for Albertans.

Sundance 7 is TAMA Power’s first project currently in development. This 856 MW combined cycle natural gas plant is proposed to be sited 70 kilometres west of the City of Edmonton on the south side of Lake Wabamun east of the existing Sundance power plant. The facility has been planned to take advantage of existing infrastructure, such as water intake and discharge structures at the North Saskatchewan River and the Sundance cooling pond.

In 2014, TransAlta, on behalf of TAMA Power, led a comprehensive stakeholder consultation program for Sundance 7 as part of the regulatory application process. Regulatory applications were filed with the Alberta Utilities Commission, Alberta Environment and Sustainable Resource Development and the Canadian Environmental Assessment Agency.

Our new pipeline delivers natural gas to iron ore Pilbara mining operations.

https://www.youtube.com/watch?v=J8aIpQuAKh4


TransAlta has reached out to neighbouring residents, landowners, First Nations, municipalities, non-government organizations and government o�cials, using a variety of communication methods. These include public open houses, town-hall public meetings, face-to-face meetings with residents and various Aboriginal and community groups, regular information-sharing meetings, mailing of a project information booklet to the local community and publishing regular project updates on the company website. A toll-free information telephone number and e-mail address were also established and made available early in the consultation program.

Cheryl McNeil, senior advisor, community relations, says, “We believe it is essential to listen to and understand stakeholder concerns, which is how these concerns can be addressed and resolved.”

The new Sundance 7 facility will leverage existing infrastructure, such as the Sundance cooling pond.

Cheryl added, “The project team has been very diligent in participating in the consultation program to provide their expert knowledge of the project by sitting at kitchen tables and meeting with local community members and Aboriginal groups. We have done a lot of listening and applied a solution-oriented approach to mitigating stakeholder concerns.”

To date, tra�c, noise and the cumulative impact of the facility on air quality are the main issues raised by stakeholders. TAMA Power has addressed these in a variety of ways. Sundance 7 will be equipped with advanced emission controls technologies and a selective catalytic reduction system to minimize air quality impacts. The plant will be in the top five to six per cent across North America for power plant e�ciency and emissions. The plant will also incorporate advanced noise abatement technology and a tra�c management plan will be implemented during construction to minimize roadway disruption.

The regulatory permitting process for Sundance 7 is expected to be complete in 2015. The Alberta Utilities Commission is holding a hearing with respect to the development of Sundance 7 in April 2015.

Advancing Cleaner Coal and CCSTransAlta is a member of the Canadian Clean Power Coalition, working with other leading power generators in pursuit of e�ective greenhouse gas emissions (GHG) reduction technologies to make carbon capture and storage (CCS) viable. Innovations like repowering existing coal units, adding fuel cells, gas turbines and biofuels are all potential ways to reduce GHG emissions, while continuing to unlock the value contained in Alberta’s massive coal reserves. TransAlta also works closely with Alberta Innovates Technology Futures, collaborating to further CCS progress.

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Sundance 7: A power plant for the future.

https://www.youtube.com/watch?v=dEvI2mqcXMs


Energy Reliability & AffordabilityTransAlta strives for low-cost electricity market leadership, while o¤ering customers the most reliable options for baseload and renewable power. Coal and natural gas are two of the most abundant fuel choices available for power generation, particularly in Alberta. While these generation fuels are non-renewable and carbon-based, their sheer quantity and availability figure prominently in keeping electricity costs competitive.

TransAlta has ownership in 11 coal-fired generating units, including mine-mouth facilities in Alberta and the Centralia coal-fired power plant in Washington State. In 2014, we advanced e¤orts to ensure our coal-fired facilities continue to operate at optimal rates and achieve key availability targets.

TransAlta is an experienced operator of natural gas-fired electricity, with a portfolio of 12 facilities in Alberta, Ontario and Australia. Natural gas generates less than half of the carbon dioxide emissions of conventional coal-fired facilities and when used in combined-cycle plant configuration, delivers significant e�ciencies. Natural gas will play an increasingly prominent role in TransAlta’s future fuel mix.

90.5201420132012

87.890.0

Adjusted Availability (%)

90.5%Facility Availability in 2014

70 per cent Owner of TransAlta Renewables

Twenty years ago, the threat of climate change was less understood. Coal was (and still is) a reliable and a�ordable fuel source for powering our electricity needs. Now that we understand the risks of global warming, we are adapting and responding by phasing out conventional coal-fired power plants. This can’t happen overnight; our markets still demand a�ordable and reliable electricity; something must replace it. We’re strongly positioned to transition and a growing gas and renewables fleet speaks highly to this. We’ll continue to meet your demands for a�ordable and reliable electricity in the future. We’re proud to say we’ve been doing it for over 100 years.

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TransAlta’s Enterprise Risk Management Program and Revamped Delivery ModelIdentifying, managing and mitigating risk is the core function of TransAlta’s enterprise risk management program. Our company’s Risk Management group is responsible for continually monitoring and evaluating a spectrum of potential risks – financial, operational, political, environmental, social – working to validate them and developing a robust view and ranking of their impacts.

TransAlta’s risk profile is evaluated at the board level annually and is presented to challenge thinking and help the company prepare for both short-term and longer-term risk scenarios.

In 2014, TransAlta’s Risk Management group developed a new delivery mechanism for risk management, which places the function more firmly inside each business unit. This approach is enabling the flow of critical risk information directly into the hands of people who make key decisions and is designed to improve awareness and accountability for the risk mitigation process.

Energy Trading’s Optimization RoleTransAlta’s energy trading operation runs 24/7, 365 days a year. This level of precision, oversight and real-time transactional capacity is fundamental to the e¤ective management of our electricity generating facilities and is a key contributor to our profitability.

Employees in this group have the overarching objective of optimizing every facility in TransAlta’s fleet. This means they purchase all fuels to feed each plant and mitigate the associated risks associated with those purchases. In addition, they buy, sell, schedule and negotiate all of the electricity transmission for each facility, and do so while applying an overlay of complex, real-time information – about potential weather, facility capacity, transmission congestion and market pricing. Quantitative analysis, forecasting, mathematical models and forward risk curves are key tools used to execute this responsibility.

In 2014, TransAlta’s trading group significantly advanced a long-term e¤ort to modernize trading systems and optimization tools. This multi-million dollar investment will streamline data flow and provide state-of-the-art linkages and enhanced scalability for key optimization tools.

In addition, in 2014, TransAlta furthered an initiative started in 2013 to enhance the training and compliance programs for all trading employees, as well as refine oversight and internal controls for transaction monitoring.

The trading floor – the heart of TransAlta’s energy trading operation.


Increasing Our Customer Focus TransAlta serves a diverse and growing customer base comprised primarily of industrial, institutional and commercial enterprises. Our larger customers consume more than 250,000 kWh of electricity and 2,500 GJ of natural gas annually.

In 2014, we were successful in both customer retention and customer attraction and increased the volumes of electricity and natural gas we delivered by 12 per cent. Our low-cost, reliable generating fleet and wide-ranging expertise in energy generation provides attractive, competitive options for our customers.

Brenda Marshall, TransAlta’s vice-president, marketing, says, “We are focusing on all aspects of the industrial customer space with dedicated resources. TransAlta is uniquely positioned to oer customers a sophisticated, sector-specific level of knowledge, experienced sales people and the ability to provide customized energy solutions.”

TransAlta recently introduced the practice of holding quarterly “Customer Days”, tailored for specific customer segments, such as oil and gas or property managers. TransAlta’s energy marketing experts and senior management lead these forums, where information is provided on new and emerging trends. Brenda Marshall says, “We really want our customers to see us as partners and trusted advisors and that we’re here to provide the information and support to enable them to make better decisions about their electricity and energy investments.”

TransAlta introduced several other initiatives for improving customer experience in 2014, including a comprehensive customer segmentation analysis, the provision of dedicated energy consultants and procurement managers, more automated requests and online options and a streamlined website.

Photo taken by the Centralia camera drone, which is used for inspections both inside and outside the facility.

Better Boiler InspectionsIn 2014, TransAlta conducted the first boiler inspection in Canada using drone technology to inspect the burner nests and nozzles inside the Sundance 5/6 unit’s boilers. Equipped with high definition cameras, drones are thorough, fast and eliminate the need to erect sca�olding and other time-consuming procedures associated with manual inspections. TransAlta plans to continue applying drone technology to boiler and other equipment inspection processes as well as aerial surveys and embankment inspections at mine sites.

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Partnering with Pattison Outdoor TransAlta’s electricity has been lighting up Pattison Outdoor’s digital outdoor advertising boards since 2009. In 2014, we extended our relationship with this long-standing customer while gaining greater visibility for our brand. TransAlta’s logo will shine on Pattison digital boards across Alberta in 2015. We’re proud to provide reliable, cost-competitive electricity and appreciate the opportunity to let Albertans know that our power plays a part in delivering high-impact advertising messages.

What does TransAlta provide for customer solutions? Watch this message from our vice-president, marketing.

https://www.youtube.com/watch?v=ywhMV-kZMy4


Wind Fleet Operation Reporting (WOPR) EnhancingCompetitive AdvantageTransAlta owns and operates one of the largest wind generation fleets in Canada. Our fleet includes more than 900 turbines. Individual wind farms are typically built with a series of identical turbines, but operating a large fleet comprised of various turbine models, data recording systems and ages poses challenges.

In 2014, TransAlta wind engineers Melissa Valgardson and Tracy Duncan created a proprietary new software tool to standardize operating performance reporting across our wind fleet. An industry-first, the software is providing TransAlta with a strong competitive advantage by quantifying all the wind fleet’s losses by component so that we can optimize our maintenance and capital activities, and enabling us to identify subtle anomalies in turbine performance.

WOPR complements our existing condition and performance monitoring activities of our wind fleet. Small issues such as slight increases in vibration or incorrect power set points, if undetected, can lead to costly repairs, equipment malfunctions and even shutdowns, as well as lost revenue from sub-par performance. Identifying these anomalies and conducting proactive maintenance across our wind fleet delivered more than $2 million in increased revenue from wind fleet performance improvements in 2014.

Wind turbines at Wolfe Island, part of TransAlta’s extensive wind fleet.

3,175,200

Wind Net Generation (MWh)

201420132012

2,709,0002,583,000

The TransAlta-owned and operated Cowley Ridge facility, Canada’s first wind facility, is still powering local communities in Alberta today. The TransAlta-owned and operated Le Nordais facility, Quebec’s first wind facility and Canada’s second wind facility, is still powering communities in Quebec today. TransAlta is proud to be a pioneer in the Canadian wind industry. Today we have a net capacity of 1,266 MW of wind power, a low cost solution to meet growing demand in North America.

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Strength in Supply ChainAll of the goods and services TransAlta needs to deliver operational, maintenance and growth initiatives are managed through a coordinated supply chain team. Annually, our company spends millions of dollars to keep our fleet properly maintained and operating safely, reliably and e�ciently. At the same time, our supply chain team ensures that a responsive, uninterrupted source of equipment and labour is available to keep operations running smoothly. We recognize our responsibility to buy goods from reputable suppliers with strong safety, economic, social, and environmental business practices and track records.

TransAlta uses local, regional, national and international suppliers and works to ensure our procurement practices are e¤ective. To support this process, we employ a scorecard to evaluate a variety of supplier metrics, from price competitiveness, quality, risk and safety compliance to flexibility and ease of doing business and partnership innovation. The scorecard provides an objective way to evaluate a total of more than 30 criteria and our supply chain team conducts scorecard evaluations with business-critical suppliers every six months.

Establishing and maintaining strong relationships with key suppliers is another important facet of proactive supply chain management. These relationships foster innovation and drive improved business results, like the new approach TransAlta introduced in 2014, through a three-year agreement with Alstom, a global firm with expertise in maintaining power plants. Alstom will conduct the next 10 turnarounds at TransAlta’s Keephills and Sundance plants – a process that is intended to drive improvements in reliability and availability, while reducing costs.

Anti-Competitive BehaviourA Culture of ComplianceKnowing the rules and ensuring they are followed is the mandate of TransAlta’s regulatory and compliance teams. We are committed to continuous improvement of our regulatory and compliance culture, programs, employee education, management oversight and the tools used to monitor these critical responsibilities.

Our regulatory and compliance teams are accountable for maximizing the value from TransAlta’s generating portfolio in the marketplace, while balancing the risk inherent in trading energy commodities. Multiple variables influence electricity prices – from weather, generating unit outages and load factor changes to fuel prices and supply and demand balances.

In 2014, TransAlta’s trading and compliance teams retained an external third party to conduct external benchmarking of our programs. Carolyn Dahl Rees, TransAlta’s vice-president, regulatory and compliance, says, “This external review confirmed that our compliance programs are eective, robust, and, in many areas, leading edge.”

The use of customized monitoring tools developed in house is one example of how our company is demonstrating compliance leadership. In 2014, compliance teams advanced e¤orts to develop a new computer program to support automated access to the thousands of market rules governing electricity trading.

Plans are in place to continue improving operational compliance systems and tools in 2015.

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W?In 2014, the Sustainable Development team evaluated TransAlta’s top 12 critical suppliers commitment to Sustainability. We’re happy to report each of these suppliers has a commitment to sustainability. Fifty per cent of our critical suppliers also respond annually to the Carbon Disclosure Project’s climate change investor survey (TransAlta has been responding since 2006).


TransAlta Participates in AUC HearingIn December 2014, TransAlta participated in an Alberta Utility Commission (AUC) hearing to respond to allegations from the Market Surveillance Administrator (MSA) concerning anti-competitive timing of forced power plant outages and trading on non-public information.

TransAlta has denied the MSA’s allegations in their entirety. The outages taken by TransAlta at its power plants were forced outages in which TransAlta exercised limited discretion over scheduling on the basis of specific guidance provided to TransAlta by the MSA. Furthermore, TransAlta maintains that the trading questioned by the MSA was based on permitted public information, including records disseminated to the Alberta Electric System Operator, a TransAlta press release and a newspaper article.

A final decision in relation to the allegations is expected to be rendered in May 2015.

John Kousinioris, TransAlta’s chief legal and compliance o�cer, says, “TransAlta has a robust culture of compliance and we earn our public license to operate every day. We follow the rules and have taken a stand about the need for greater clarity and consistency in the application of the rules in Alberta’s deregulated electricity market.”

The Bearspaw facility on the Bow River, part of TransAlta’s hydro fleet in Alberta.



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.

30


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

2

1

3

4

5

50

100

150

200

250 (mg/MWh) (kg)

2012 2013 2014

total emissions (kg)emissions intensity (mg/MWh)

SO2 Emissions

0.6

0.3

0.9

1.2

1.5

20 10

30 40 50 60

(kg/MWh) (thousand tonnes)

2012 2013 2014

total emissions (thousand tonnes)emissions intensity (kg/MWh)

NOx Emissions

0.3

0.6

0.9

1.2

20

10

30

40

50 (kg/MWh) (thousand tonnes)

2012 2013 2014


Greenhouse gas (GHG) Emissions

0.2

0.4

0.6

0.8

10

20

30

40 (tonnes CO2e/MWh) (million tonnes CO2e)

2012 2013 2014

gross emissions (million tonnes CO2e)emissions intensity (tonnes CO2e/MWh)

Mercury Emissions

2

1

3

4

5

50

100

150

200

250 (mg/MWh) (kg)

2012 2013 2014


SO2 Emissions

0.6

0.3

0.9

1.2

1.5

20 10

30 40 50 60


2012 2013 2014


NOx Emissions

0.3

0.6

0.9

1.2

20

10

30

40


2012 2013 2014



0.2

0.4

0.6

0.8

10

20

30


2012 2013 2014


Mercury Emissions

2

1

3

4

5

50

100

150

200

250 (mg/MWh) (kg)

2012 2013 2014


SO2 Emissions

0.6

0.3

0.9

1.2

1.5

20 10

30 40 50 60


2012 2013 2014


NOx Emissions

0.3

0.6

0.9

1.2

20

10

30

40


2012 2013 2014



0.2

0.4

0.6

0.8

10

20

30


2012 2013 2014


Mercury Emissions

2

1

3

4

5

50

100

150

200

250 (mg/MWh) (kg)

2012 2013 2014


SO2 Emissions

0.6

0.3

0.9

1.2

1.5

20 10

30 40 50 60


2012 2013 2014


NOx Emissions

0.3

0.6

0.9

1.2

20

10

30

40


2012 2013 2014



0.2

0.4

0.6

0.8

10

20

30


2012 2013 2014


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.



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).



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

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Environmental Incidents

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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.

https://www.youtube.com/watch?v=_1LzfEe1wBI


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 Centralia mine 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 reclaimed area of the Highvale mine.

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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We value positive relationships with our stakeholders – employees, customers, Aboriginal peoples, communitymembers, government, regulators and others.

SocialSustainability

TransAlta employee Heather Retzla� at the Ghost dam.

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Health, Wellness & Safety Best Ever Safety PerformanceTransAlta applies the injury frequency rate (IFR) measurement tool to evaluate the annual safety performance of employees and contractors. To do so, we calculate the number of lost time and medical aid injuries that occur during a calendar year, for every 200,000 hours worked.

In 2014, TransAlta achieved a combined (employee and contractor) IFR of 0.86 – the best ever IFR metric in our corporate history. This performance firmly placesTransAlta among the top quartile safety performers in the utility industry and reflects an exceptional e¤ort from employees and contractors who fulfilled their on-the-job responsibilities in a safe, carefully planned and thoughtful manner.

Cherie Whelan, EH&S team leader, corporate EHS, says, “TransAlta’s robust safety performance is the result of continually reinforcing safety awareness and promoting practical tools that support it, from tail-board meetings and safety moments to the encouragement of near-miss reporting.”

Going forward, TransAlta’s safety leaders will continue to apply leading behavioural and awareness tools as the company works to reduce worker injuries. TransAlta’s target IFR in 2015 is 0.90.

12 / 51 / 37

Employees by Age (%)

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13 / 51 / 3613 / 51 / 35

less than 3030 to 50over 50

7.0201420132012

7.37.3

Total Employee Turnover Rate (%)

CORE only: permanent full-time and permanent part-time employees

35%Women inSenior Management

0.86Combined Employee and Contractor Injury Frequency Rate





Bob Nelson, director, Centralia plant and mine sites, says, “Every employee and contractor has been committed to keeping safety as our number one priority, so that every person goes home injury free every day.”

TransAlta is an experienced power generator in the Australian market, with 425 MW of generating capacity that is sold primarily to industrial mining customers. TransAlta’s Centralia and Australian operations each delivered a full year of operations without a single recordable safety incident.

Aron Willis, vice-president, Australia, says, “Twelve months of zero IFR is quite exemplary. We’re very proud of our employees and contractors, especially since there was an accelerated amount of construction and development activity taking place in 2014.”

Following the proper safety procedures and using the correct safety equipment is crucial, no matter what the job.

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Employee and Contractor Injury Frequency Rate(injuries/200,000 hours worked)

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Zero IFR Targets Met in Australia and CentraliaTransAlta operates the Centralia coal-fired facility in Southwest Washington, USA, employing about 350 people. On November 12, 2014, the Centralia operations team o�cially achieved a full year without a recordable safety incident.


Making Time for Safety MomentsA safety moment at TransAlta is a short, one or two-minute conversation shared between four or more employees about a safety topic. Typically introduced at the beginning of a meeting, the idea is to keep safety issues top of mind and to avoid letting complacent attitudes take hold.

In 2014, TransAlta introduced the safety moment concept and took it one step further, by introducing safety moment posters and placing them inside meeting rooms throughout our o�ces and operating sites. The posters are continually refreshed, so that new topics and seasonal-related hazards are highlighted, putting safety on every meeting agenda.

Eliminating Slips and FallsWhy is a penguin associated with winter walking safety?Because mimicking its slow and somewhat awkward gait makes people slow down on slick ice and snow and gain more traction and control.

Slips and falls are the single most common injury at TransAlta and Gary Woods, vice-president, gas and renewables and a safety champion, is firmly focused on reducing this statistic. Evaluating winter conditions, snow removal on work sites, footwear expectations and training and procedures all play a role in helping to eliminate this persistent injury category.

Gary says, “As far back as I can look in records, we’ve never had a year when someone hasn’t been hurt from a slip and fall. So, when we can finally lay claim that we had a year when nobody got hurt from this type of injury, it will mean we have taken personal safety awareness and behaviours to the next level.”

Recording fewer incidents and improving safety performance is important, but safety goes beyond numbers. Gary says, “Whenever we have a safety incident, that means a person has been hurt, and that is unacceptable. Safety simply has to be the number one priority in all that we do.”

Mississauga Gas Facility Incident InvestigatedTransAlta shares 50 per cent ownership in, and operates, a natural gas-fired facility in Mississauga, Ontario. In early 2014, a component failure in a gas compressor at the plant caused a minor failure. Fortunately, no one was injured but the incident resulted in a forced outage and repairs were required to replace equipment, at a combined cost of about $2 million.

A full incident root analysis was conducted to identify the reason for the component failure and to avoid similar incidents in the future. TransAlta benchmarks the operating e�ciency of our gas fleet on an annual basis and remains in the top quartile for availability, e�ciency and safety performance.

Public Health and SafetyNot only does TransAlta take the safety of its employees seriously, we’re concerned for the safety of the public. Our friends and family make up part of the collective public, hence we mean it when we say it. When we define public, we also consider the environment and our local wildlife friends, who also need our support (please refer to Biodiversity Management on page 34 for further details).

TransAlta’s internal environment health and safety policy (policy 403) is the catalyst for action regarding public health safety. As defined by policy 403, “TransAlta is committed to the protection of the environment and the health and safety of workers and the public.” Further to this, TransAlta has a commitment to “hold employees accountable for following established environment, health and safety procedures and working in a manner that safeguards themselves, their co-workers, the public and the environment.”

Our action across our fleet put these policy commitments in to context. At our gas and coal facilities, public access is limited, facilities are fenced and security is on site, 24/7. The main public concerns we encounter at our coal facilities are related to water emissions, air emissions and wildlife. Our water emissions are minor; in 2014, we had no emergencies or fines associated with emissions (see page 33 for further details). We do have air emissions, but we diligently manage these and have set aggressive targets to reduce them. By 2030, we will have reduced our air emissions from coal by 90-95 per cent (see page 11 for further details).

Our gas operations have a small footprint and are secure with limited public access. Gas has a lower carbon footprint than coal and we don’t have much public concern regarding these facilities. In many cases, it is the opposite. We operate a cogeneration facility in Ottawa, serving the Ottawa Health Sciences Centre, something we’re proud to support and something the public is very supportive of.

More than a decade of continuous monitoring in the air sheds surrounding coal-fired power plants west of the city reveals no evidence that air quality issues in Edmonton are related. D

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Stakeholder RelationsTransAlta’s stakeholder relations philosophy revolves around relationships with internal and external stakeholders. We believe strong stakeholder relationships strengthen the business decisions we make. While they require time and e¤ort to initiate, maintain and sustain, positive stakeholder relationships result in greater understanding, heighten mutual respect and open doors to productive and creative outcomes.

TransAlta works diligently to ensure that we identify and seek out stakeholders who may be a¤ected by our operations. We strive to ensure our consultation processes are transparent and fair for all participants, and that positive, two-way communication ensues.

We also endeavor to involve stakeholders in our consultation processes, and invite them to help design them, so that they contribute their ideas, share their concerns and are confident they will be heard.

Enhancing Stakeholder EngagementOne of TransAlta’s sustainability targets for 2014 and beyond was to develop and formalize a corporate framework for stakeholder engagement.

To advance this e¤ort, TransAlta initiated a peer review in 2014. We assessed the stakeholder engagement activities of local, national and international power generation and energy sector peers and conducted an internal survey to review and document existing stakeholder engagement practices in use across our company. We also evaluated mapping tools and tracking database technologies and staged a comprehensive workshop for employees with stakeholder-facing responsibilities.

Following this research and analysis, a full stakeholder engagement framework plan will be developed for executive review in the second quarter of 2015, with implementation planned through the balance of 2015.

TransAlta employees built on the previous years’ pedometer challenges by forming teams and joining the Global Corporate Challenge.

TransAlta Encourages Employee Health and WellnessTransAlta has encouraged employee participation in a fleet-wide pedometer step challenge for several years. In 2014, our company took up the Global Corporate Challenge. For a period of 100 days, employees increased their physical activity levels and improved their diets, enabled by fun, easy-to-use online apps and tools. Participation in TransAlta’s Global Corporate Challenge has helped our employees lose weight, gain energy, improve productivity and achieve healthier work/life balance.

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TransAlta’s Silver Level Progressive Aboriginal Relations award.

Aboriginal RelationsTransAlta Achieves Silver Level Progressive Aboriginal Relations Certification TransAlta qualified for certification as a Progressive Aboriginal Relations (PAR) company in 2012 and since then has worked to advance within this respected program, administered by the Canadian Council for Aboriginal Business (CCAB). PAR certification independently verifies companies as solid business partners and employers who are committed to creating long-term economic opportunities and prosperity for Aboriginal communities.

In 2014, TransAlta proudly achieved PAR’s Silver Level designation, one of only 10 companies in Canada to achieve this distinction. Amanda Sanregret, senior advisor, Aboriginal relations, says, “TransAlta’s eorts to encourage Aboriginal employment, to hire locally, to provide mentoring and coaching regarding bid opportunities and to embed this inclusive approach were important factors in attaining PAR Silver Level status.”

“Companies achieving PAR Silver have a robust and proven Aboriginal relations program and have Aboriginal partnerships in place, “ says JP Gladu, president and CEO of CCAB. “TransAlta recognizes the importance of early engagement and communication, and appreciates the value Aboriginal peoples bring to the workplace as employees and contractors.”

TransAlta plans to pursue PAR’s Gold Level designation and will be working towards this for 2017.

Enhancing Consultation Practices TransAlta recognizes our duty to consult with all Aboriginal peoples in Canada – First Nations, Métis and Inuit – wherever our business and electricity generation activities intersect with traditional lands. In 2014, TransAlta began a proactive e¤ort to establish relationships with Métis Nation Regions 1, 4 and 5. TransAlta believes recent legislative progress recognizing Métis traditional land use rights within settlement areas reflects a progressive attitude and approach.

Planting the FutureIn June 2014, Paul First Nation School students, Band Elders and TransAlta employees together planted more than 800 trees at our Whitewood Mine, located north of Lake Wabamun, west of Edmonton, Alberta.

TransAlta is one of only 10 companies in Canada to achieve PAR’s Silver Level designation.

TransAlta interacts with over 40 Aboriginal groups across Canada, including the Paul First Nation, the Stoney Nakoda Nation, the Simpcw First Nation and the Squamish Indian Band. D

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Paul First Nation volunteers and TransAlta employees prepare for tree planting at the Whitewood mine area.

The event was a relationship-building e¤ort between TransAlta and the Paul First Nation (PFN) that involved sharing knowledge about our company’s mine reclamation activities with PFN youth, while learning more about traditional knowledge from PFN youth and Elders.

Dan Kuchmak, TransAlta reclamation planning specialist, says, “The process gave students an idea of what giving back to nature looks like and will hopefully lead some students in a career path focused on the environment.”

Promoting Educational PathwaysTransAlta has built more than a decade of strong support for Aboriginal education, through a variety of post-secondary scholarships and bursaries for Aboriginal learners. In 2014, TransAlta supported a total of 17 post-secondary scholarships and three trade school scholarships and provided funding for Aboriginal community leaders to attend the Indigenous Leadership and Management Program o¤ered by the Ban¤ Centre.

Respecting Aboriginal Rights in AustraliaThe Marapikurrinya are an indigenous Aboriginal people who reside in the Port Hedland area of Western Australia. They are original inhabitants of the land, which today is state-owned and designated by the Australian government for industrial use. An Aboriginal Heritage Agreement governs the region’s land use and if any sites of cultural significance are identified during development, they can’t be disturbed without local Aboriginal supervision.

To ensure that the Fortescue River Gas Pipeline Project met these guidelines, the entire 270-kilometre pipeline route was surveyed on foot to identify artifacts or culturally significant sites. Members of the Marapikurrinya group were employed by TransAlta and pipeline joint venture partner DBP Development Group (DDG) to assist the pipeline team. In addition, all workers on the pipeline project site were required to participate in Aboriginal Heritage Awareness Training.

Several culturally significant sites were identified along the proposed pipeline route and route adjustments were made in order to avoid these sensitive areas.


The TransAlta employee team that travelled to Peru to install solar panels as part of Light Up The World.

Community InvolvementTransAlta’s Employees Top United Way GoalFor the fourth consecutive year, TransAlta employees exceeded the fundraising target for the annual United Way campaign, raising $885,000. TransAlta matches annual employee contributions and in total our company raised $1.95 million for United Way.

The United Way is a leading charitable organization, dedicated to directing dollars raised to hundreds of member agencies. These are the grass roots organizations, active at a local level, delivering front-line social programs that address poverty, support kids and build healthier communities.

In addition to financial contributions, annual United Waycampaigns raise awareness and provide valuable opportunitiesfor employees to team-build, reinforce working relationshipsand have fun while supporting a worthwhile cause. Duringthe campaign, which was themed “Power Up Double Down”,

TransAlta employees staged a series of events, from bake salesand barbecues to silent auctions, talent shows and a massivetractor pull using a heavy mine haul truck. Our inaugural “We Golf United” golf tournament raised over $75,000, and employees also took part in several Days of Caring, volunteering their time with local agencies to support those in need, doing everything from yard clean up in communities to serving lunches.

TransAlta Employees Light Up The World in PeruLight Up The World (LUTW) is a Canadian non-profit organization that builds partnerships to empower communities with access to renewable energy. In November 2014, nine TransAlta employees took part in a 12-day TransAlta sponsored expedition to Peru with LUTW. Their mission was to light up homes in the remote district of San Pedro de Larcay by installing solar panels. Access to electricity is challenging in the region and many residents rely on kerosene, candles or batteries.

LUTW trained the TransAlta volunteers on the installation process shortly after they arrived, and during their stay, they installed a total of 32 solar panels in village homes.


Our TransAlta executives hit the ground to learn more about United Way and the Calgary Drop in Centre.

https://www.youtube.com/watch?v=w9Jz_zv7_fs


Some of the TransAlta team and locals from San Pedro de Larcay, Peru with one of the recently installed solar panels.

Trisha Stecyk, TransAlta category buyer, says “The installations allow families to have light into the evening, which might be the dierence between a student being able to complete their homework or not. The health benefits of eliminating kerosene smoke are huge and the systems help decrease costs of batteries, flashlights and candles.”

TransAlta’s LUTW volunteers benefited from the shared experience and teamwork required. TransAlta’s partnership with LUTW will continue in 2015, when two more expeditions are planned. Employees compete for the privilege of volunteering and submit essays that are judged by an internal panel.

27.2201420132012

23.718.0

Volunteer Hours (thousands)

9.8201420132012

8.68.7

Volunteer Hours per Employee/Retiree

Investing in CommunityTransAlta believes it is essential for companies to play a meaningful and ongoing role in the betterment of the communities in which they operate.

TransAlta has demonstrated this philosophy through a long-term program of sustained community investment, supporting organizations that contribute to health, recreation, social services, environmental and arts and culture. In 2014, TransAlta contributed a total of $3.6 million in donations and sponsorships.

In November 2014, nine TransAlta employees joined LUTW to install solar panels in Peru. Here’s their story.

https://www.youtube.com/watch?v=LPRM1beYI4w


At TransAlta, employees take charge of their career development and have access to a number of support tools.

3.6

Community Investment ($ millions)

201420132012

3.84.5

Human ResourcesPowering Potential – HR at TransAltaThe array of employee development programs TransAlta supports are designed to enable our people to reach their potential. We endeavor to create a workplace that o¤ers meaningful challenges, that fosters teamwork and rewards innovation and creativity.

One TransAlta – Our Leadership Framework Creating and nurturing a workplace where employees trust and respect each other, and feel empowered to achieve their goals is the overarching objective behind “One TransAlta” – a leadership development framework introduced by our Human Resources group in 2014.

The framework identifies six core attributes or behaviours that all TransAlta employees – from front-line employees through management – are expected to demonstrate in their daily interactions throughout the work environment. They include strategic thinking, leadership, drive for results, professional excellence, continuous development and accelerating the organization.

TransAlta Supports Volunteer Week in CanadaIn 2014, TransAlta began partnering with the National Volunteer Week organization, in recognition of the valuable benefits that accompany civic engagement. In 2014, TransAlta’s employees and retirees each contributed an average of 9.8 hours to voluntary initiatives.

DID Y O U K N O

W?


TransAlta’s success story of our new HR system, Dart; a system to give time back to employees.

https://www.youtube.com/watch?v=-0grkO0QeNU&feature=em-uploademail


Harvard ManageMentor is a comprehensive online learning resource TransAlta has invested in for employee reference. It o¤ers training modules aligned with our core attributes so that employees can engage in self-directed learning and access tools to improve their core attributes and leadership performance.

Succession Planning Key to SuccessEnsuring that TransAlta has the right people in the organization behind current leadership teams is an important competitive strategy and helps ensure the company is prepared to proactively adapt to personnel changes.

Previously, TransAlta’s succession plans were largely focused at the executive level. In 2014, TransAlta’s human resources group introduced a company-wide succession-planning program that encompasses all employees, right to the individual contributor level.

Meeting with job seekers at events is all part of the process in trying to find the best employees.

Joann Paton, manager of organizational e¤ectiveness, says, “This eort really was about gathering more robust information across the organization. We were asking who the successors are to the current vice-presidents and, comparatively speaking, what do they have in terms of skills today and what do they need to improve?”

As a result of the initiative, career development plans are now in place for all TransAlta employees and there is better information available about the specific skills and capabilities our people need to move their careers forward.

TransAlta Has a Healthy Attrition RateTransAlta’s attrition rate (the percentage of employees who voluntarily leave the company each year) has remained consistent at between seven or eight per cent for several years – a turnover considered competitive in the utility industry. Companies need employees with a diversity of experience and a healthy turnover ensures our organization is continually refreshed with new people and perspectives.

DID Y O U K N O

W?


Representing TransAlta at the 2015 Women in Resources Awards in Western Australia.

Streamlining the Hiring ProcessCompanies must be able to find, attract and retain the right people and speed is an important factor in ensuring sta�ng levels are su�cient.

Maintaining the right sta¤ complement is an accountability that shifted to TransAlta’s business units when the company was restructured in 2013 and adopted a more operations-centric model. However, leaders within the business units were not always able to make sta�ng their top priority.

In 2014, TransAlta’s human resources group addressed this issue by partnering with a human resource contractor who provides direct support in shepherding the hiring process, conducting pre-screening and short-listing candidates for interviews. The trial has delivered significant improvements, decreasing the time required to fill a position, from first job posting to signed acceptance of o¤er from 78 days to just 54 days, which is top-quartile performance.

Promoting Positive Labour RelationsApproximately 53 per cent of TransAlta’s 2,600 workers belong to unions, which include the International Brotherhood of Electrical Workers (IBEW) and United Steel Workers (USW). TransAlta works to maintain open and positive relationships with union representatives and regularly meets with these individuals to exchange information, listen to concerns and share ideas that further our mutual objectives. Collective bargaining is conducted in good faith, and we respect the rights of all employees to participate in collective agreements.



TransAlta Corporation | 2014 Report on Sustainability

OurDiverseMix ofEnergy:2014FuelHighlights

54

TransAlta Corporation | 2014 Report on Sustainability 55

Do you know where your electricity

comes from?


Coal

Coal is an affordable and reliable fuel source to generate electricity. We’re aware of its environmental footprint and we’re making changes to accommodate. We don’t want pollution either.

Coal by the Numbers in 2014Net Capacity 4,931% of TransAlta Total Capacity 57%Net Generation 32,237 GWhAvailability 88%Comparable EBITDA $448 MillionCarbon Footprint 32 million tonnes Water Consumption 59 million m3

Waste to Landfill 1 1,761 tonnesWaste Recycled/Reuse 2 851,408 tonnesReportable Environmental Incidents 14Safety – Injury Frequency Rate 1.04

Not all coal is created equally, and ours was created a little better than the rest. In Alberta, our coal has one of the lowest sulphur levels in North America, reducing our sulphur dioxide emissions considerably.D

ID Y O U K N OW?

1 Non-hazardous & hazardous waste to landfill based on weight (tonnes).2 Non-hazardous & hazardous waste recycled or reused based on weight (tonnes).


Natural Gas

Natural gas is an abundant and affordable source of fuel for electricity generation. Cleaner than coal and oil, natural gas is positioned as the fuel source to meet our energy demands in the 21st century.

Natural Gas by the Numbers in 2014Net Capacity 1,447% of TransAlta Total Capacity 18%Net Generation 7,390 GWhAvailability 94%Comparable EBITDA $309 millionCarbon Footprint 2.7 million tonnes Water Consumption 11 million m3

Waste to Landfill 1 681 tonnesWaste Recycled/Reuse 2 118 tonnesReportable Environmental Incidents 0Safety – Injury Frequency Rate 0.64

We’re in the regulatory approval stages to build a 856 MW gas-fired power plant adjacent to our existing coal facilities (see page 22). As coal retires, the next generation is emerging.D

ID Y O U K N OW?



Hydro

We’ve been operating hydro assets since 1909.

DID Y O U K N O

W?

Hydro fits in seamlessly to any electricity grid without adding air emissions.

Hydro by the Numbers in 2014Net Capacity 914% of TransAlta Total Capacity 10%Net Generation 1,885 GWhAvailability N/AComparable EBITDA $85 millionCarbon Footprint 0 tonnes Water Consumption 0Waste to Landfill 1 17 tonnesWaste Recycled/Reuse 2 7 tonnesReportable Environmental Incidents 1Safety – Injury Frequency Rate 3.06



Wind

A number of our wind facilities qualify to generate offset credits under the Alberta Specified Gas Emitters Regulation (SGER). D

ID Y O U K N OW?

Our wind business has grown from 150 MW in 2005 to 1,266 MW in 2014. Today, we are one of Canada’s leaders in the wind industry and have industry leading professional expertise.

Wind by the Numbers in 2014Net Capacity 1,266% of TransAlta Total Capacity 15%Net Generation 3,175 GWhAvailability 94.6%Comparable EBITDA $177 millionCarbon Footprint 0 tonnes Water Consumption 0Waste to Landfill 1 42 tonnesWaste Recycled/Reuse 2 83,749 tonnesReportable Environmental Incidents 0Safety – Injury Frequency Rate 1.77



About this Report

Our Report on Sustainability is an open book with the singular purpose of providing clear and comprehensive coverage about TransAlta’s sustainability practices, progress and performance.

As a progressive power generation company, TransAlta is producing more electricity with less impact. Through increased development of new technology and the expansion of all available power sources, we are helping meet the growing demand for clean, reliable and competitively priced electricity.

By putting the commitment, expertise and active involvement of our people and our stakeholders at the core of our day-to-day business and strategy development we are having a profound impact on our success and approach to sustainability.

We are making changes to improve our business, maintain our operational excellence, target better forms of generation and mitigate our impacts on society. And, ever conscious of our responsibility to the places where we live and work, we are ensuring a mindset of stewardship which guides our every step.

TransAlta is, without question, a better company for the steps we have taken. But being better is as much a journey as it is a destination.

In the preceding pages, we have asked our people to share our achievements, our challenges and the context for our sustainability performance in 2014. The following section examines the facts and numbers behind the sustainable growth TransAlta strives for every day.

About This ReportWe provide regular reports on our progress; our 2014 Report on Sustainability is our 21st annual report and was produced in April 2015.

This report follows guidance from the Global Reporting Initiative (GRI) G3.1 framework and the Integrated Reporting Framework from the International Integrated Reporting Council (IIRC), but does not strictly adhere to either reporting framework. Guidance from external sustainability reporting frameworks allows us to ensure we provide accurate, consistent, credible and transparent reporting that is comparable to other leading sustainable organizations.

Reporting on What MattersThe topics and indicators in this report have been selected according to an extensive iterative process that included:

• A materiality assessment, which identified areas of key concern for stakeholders, industry specific and company specific;

• Interviews with a diverse range of TransAlta employees as well as several people external to the company, selected to represent key stakeholder groups;

• Continual review of emerging issues in sustainability by our sustainable development team;

• Identification of material risks to the organization through our comprehensive enterprise risk management process;

• Indicators and issues that are tracked and reported internally;

• Involvement in numerous external policy groups and task forces that identify key challenges for our industry at all of our locations;

• Social and environmental responsibility investor reports and indices; and

• At a minimum, information and data that is deemed significant and that requires reporting by regulators and industry associations.Please take our online survey.

transalta.com/sustainability/feedback



Inclusion PrinciplesThis report covers the calendar year ending December 31, 2014, though in some instances we have also included significant events from early 2015. All dollar amounts are in Canadian funds unless otherwise noted.

We report environmental data for power plants for which TransAlta holds the operating permit, regardless of financial ownership. We report on the health and safety aspects of all TransAlta operated facilities where the employees and contractors are hired by TransAlta.

The following facilities are not reported in this statistical summary because TransAlta does not hold the operating permits, but may be reported in TransAlta’s 2014 Annual Report (available at www.transalta.com) with respect to financial performance: Genesee 3, Alberta; Sheerness plant, Alberta.

The following facility’s environmental performance is not included in this statistical summary but the health and safety indicators reflect the performance of TransAlta employees and contractors onsite: Poplar Creek Power Station, Alberta (operating permit not held by TransAlta).

Megawatt hours used to calculate environment, health and safety data in this report differ slightly from electricity production reported in our 2014 Annual Report due to the exceptions noted above. Reporting of financial performance in this report is based on the proportion of financial ownership and the scope is consistent with our 2014 Annual Report, regardless of the exclusions cited above.

Reporting EntityWe report our activities corporately and by country. Country indicators can be found on our website. We cover direct operational impacts and do not include supply chain impacts such as emissions from product suppliers.

Reporting ScopeWe discuss achievements that result directly from our actions. We report performance frequently through totals and ratios. We use total emissions to show environmental impacts. We use emissions intensity rates (for example, emissions per megawatt hour) to measure our operations’ efficiency in controlling emissions.

Reporting IntegrityWe collect data on various parameters from our facilities in the areas that we operate. The data presented in this report is gathered from the subject experts at those facilities in a standardized template with set methodologies and uncertainty factors at the end of each year. All data is reviewed by the subject expert and is entered into a corporate database where the data is again reviewed for accuracy and comparability to previous year’s data and similar operations data by an independent internal data manager. When anomalies in data are detected, the data manager seeks clarification and explanation for the anomaly and notes are made on the results of the follow-up.

Ernst & Young conducted a limited assurance engagement1 in relation to selected key performance indicators for the year ending December 31, 2014. Details of the scope and conclusions of the assurance engagement can be found in the Independent Limited Assurance Statement found on page 62.

Greenhouse gas emissions for our Alberta Coal Plants (Sundance and Keephills), Highvale Mine, and Fort Saskatchewan cogeneration plant are externally verified annually, to a reasonable level of assurance, as required by under the Specified Gas Emitter’s Regulation. The 2014 annual compliance reports submitted March 7, 2015 were audited by Ernst & Young.

1 Procedures in a limited assurance engagement will be deliberately more limited in nature, timing or extent than in a reasonable assurance engagement.

8 Consecutive YearsOf Independent Assurance Verifications On Our Sustainability Reports


Independent Limited Assurance Statement

Our ResponsibilitiesOur limited assurance engagement has been planned and performed in accordance with the International Standard on Assurance Engagements ISAE 3000 “Assurance Engagements other than Audits or Reviews of Historical Financial Information.”

Subject MatterWe have performed a limited assurance engagement on the following quantitative sustainability performance indicators that are presented on page 64 to 67 of the TransAlta Report on Sustainability (“the Report”) for the year ended December 31, 2014:

• Sulphur dioxide emissions and emission intensity

• Nitrogen oxide emissions and emission intensity

• Particulate matter emissions and emission intensity

• Mercury emissions and emission intensity

• Carbon dioxide emissions

• Methane emissions

• Nitrous oxide emissions

• Total transportation greenhouse gas emissions

• Gross greenhouse gas emissions and emission intensity

• Land used in mining activities

• Land used by plants, offices and equipment

• Land use – disturbed

• Land use – reclaimed

• Land reclamation

• Non-hazardous waste – landfill, ash disposal: mine, ash disposal: lagoon, recycled, reuse, storage

• Hazardous waste – landfill, recycled

• Total water intake and water intake – river, lake, purchased

• Total water discharge

• Water consumption and water consumption intensity

• Environment incidents

• Employee and contractor fatalities

• Injuries to employees and contractors – long-term injury and medical aids

• Employee and contractor injury frequency rates

• Community investments

• Water consumption and water consumption intensity

• Total water intake

CriteriaTransAlta has prepared its specified performance information in accordance with industry standards and where relevant, internally developed criteria.

TransAlta Management ResponsibilitiesThe Report was prepared by the management of TransAlta, who is responsible for the collection and presentation of the performance indicators, statements, claims in the Report and the criteria used in determining that the information is appropriate for the purpose of disclosure in the Report. In addition, management is responsible for maintaining adequate records and internal controls that are designed to support the reporting process.

Level of AssuranceOur procedures were designed to obtain a limited level of assurance on which to base our conclusions. The procedures conducted do not provide all the evidence that would be required in a reasonable assurance engagement and accordingly, we do not express a conclusion conveying a reasonable level of assurance. While we obtained an understanding of management’s internal processes when determining the nature and extent of our procedures, our limited assurance engagement was not designed to express a conclusion on internal controls.

To the Board of Directors and Management of TransAlta Corporation (“TransAlta”).


Work PerformedIn order for us to express a conclusion in relation to the above scope of work, we have sought to answer the following questions for the performance indicators reviewed:

Completeness• Has TransAlta fairly presented performance information

concerning the selected performance indicators with respect to the boundaries and time period defined in the Report?

• Has TransAlta included sustainability performance information from all material entities in its defined boundary for its reporting of the selected performance indicators?

• Has TransAlta accurately collated corporate data relating to the selected performance indicators from operations level data?

Accuracy• Is the data reported for the selected performance indicators

sufficiently accurate and detailed for stakeholders to assess TransAlta’s performance?

Our assurance procedures at TransAlta’s corporate head office included but were not limited to:

• Interviewing selected personnel at Corporate and selected sites to understand the key sustainability issues related to the selected performance data and processes for the collection and accurate reporting of performance information

• Where relevant, obtaining an understanding of the design and implementation of systems and processes for data aggregation and reporting

• Checking key assumptions against the evidence to support the assumptions

• Checking the accuracy of calculations performed, on a test basis, primarily through inquiry, variance analysis and re-performance of calculations. and analytical procedures

• Checking that data and statements had been correctly transcribed from corporate systems and/or supporting evidence into the Report

Limitations of our Work PerformedOur scope of work did not include expressing conclusions in relation to:

• The materiality, completeness or accuracy of data sets or information relating to areas other than the selected performance data, and any site-specific information

• Information reported outside of TransAlta’s 2014 Report on Sustainability

• Management’s forward looking statements

• Any comparisons made by TransAlta against historical data

• The appropriateness of definitions for internally developed criteria

Our ConclusionBased on our procedures for this limited assurance engagement described in this Report, nothing has come to our attention that causes us to believe that the Subject Matter is not, in all material respects, reported in accordance with the relevant criteria.

Ernst & Young LLPCalgary, CanadaApril 17, 2015


Performance Indicators

Corporate Statistics

Management Systems 2012 2013 2014

Facilities with ISO 14001 and/or OHSAS 18001-based management systems 1 62 62 62Generation capacity with ISO 14001 and OHSAS 18001-based management systems (%) 100 98 98Management system audits 2 9 14 9Compliance audits 3 6 14 9Special audits 4 5 0 8

Environmental Performance 2012 2013 2014

Air Emissions 5

Sulphur dioxide (tonnes) 3 32,600 36,200 47,600Sulphur dioxide emission intensity (kg/MWh) 3 0.84 0.85 1.06Nitrogen oxide (tonnes) 3 39,300 42,900 52,900Nitrogen oxide emission intensity (kg/MWh) 3 1.01 1.01 1.18Particulate matter (tonnes) 3 2,700 2,900 4,900Particulate matter emission intensity (kg/MWh) 3 0.07 0.07 0.11Mercury (kilograms) 3 118 172 224Mercury emission intensity (mg/MWh) 3 3.04 4.05 4.97

Greenhouse Gas Emissions 6

Carbon dioxide (tonnes CO2e) 3 26,210,100 30,317,400 34,601,500Methane (tonnes CO2e) 3 84,800 92,700 119,000Nitrous oxide (tonnes CO2e) 3 172,600 197,900 229,800CFCs (tonnes CO2e) 0 0 0Sulfur hexafluoride (tonnes CO2e) 10 10 10

Total transportation greenhouse gas emissions (tonnes CO2e) 3 99,800 101,200 118,500Gross emissions (tonnes CO2e) 3 26,567,300 30,709,200 35,068,800Gross emission intensity (kg CO2e/MWh) 7 3 686 723 779Scope 1 GHG emissions 8 26,392,600 30,522,100 34,890,300Scope 2 GHG emissions 9 174,700 187,100 178,500

Land Use and ReclamationLand used in mining activities (hectares) 10 3 7,028 7,085 7,119Land used by plants, offices and equipment (hectares) 3 3,744 3,744 3,735Land use – disturbed (cumulative hectares) 3 11,355 11,493 11,589Land use – reclaimed (cumulative hectares) 3 4,314 4,408 4,471Land reclamation (% of former land reclaimed) 11 3 38 38 39

Waste Management – Non-Hazardous Waste 12

Landfill (tonnes) 3 2,900 2,700 2,500Landfill (L) 3 87,800 397,300 42,300Ash disposal: mine (tonnes) 13 3 837,200 1,200,000 1,636,200Ash disposal: lagoon (tonnes) 14 3 408,700 360,900 532,800Recycled (tonnes) 3 8,900 5,800 89,000Recycled (L) 3 459,700 217,700 157,500Reuse (tonnes) 3 520,600 605,300 846,300Storage (tonnes) 3 20,800 33,000 33,600Waste Management – Hazardous Waste 15

Landfill (tonnes) 3 50 10 10Landfill (L) 16 3 1,500 200 569,100Recycled (tonnes) 3 40 40 30Recycled (L) 3 354,800 475,600 352,400


26 Environmental Compliance, Management System and Special Audits in 2014

Environmental Performance (continued) 2012 2013 2014

Water Management 17

Total water intake (million m3) 3 228 233 242Water intake – river (million m3) 3 215 230 239Water intake – lake (million m3) 3 1 1 1Water intake – purchased (million m3) 3 1 1 1Total water discharge (million m3) 3 175 170 171Water consumption (million m3) 3 52 73 71Water consumption intensity (m3/MWh) 18 3 1 2 2

Environmental IncidentsGeneral air regulatory contraventions 1 3 3General water regulatory contraventions 0 0 2Spills to land regulatory contraventions 6 2 4Spills to water regulatory contraventions 8 7 1Other regulatory contraventions 19 0 0 4Administrative regulatory contraventions 20 2 2 1Total environmental incidents 3 17 14 15

Environmental enforcement actions 21 0 4 0Environmental fines ($ thousands) 0 0 0

SpillsVolume of significant spills (m3) 22 7 1,155 498Volume of significant spills recovered (m3) 6 520 435

Production 2012 2013 2014

Coal generation net ownership capacity (MW) 4,926 4,931 4,931Natural gas generation net ownership capacity (MW) 1,913 1,916 1,597Hydro generation net ownership capacity (MW) 919 898 914Wind generation net ownership capacity (MW) 1,129 1,049 1,266Total net ownership capacity (MW) 23 9,051 8,964 8,707

Coal net generation (MWh) 24,001,000 28,279,000 32,237,400Natural gas net generation (MWh) 8,230,000 7,854,200 7,390,300Hydro net generation (MWh) 2,356,000 2,084,600 1,885,000Wind net generation (MWh) 2,583,000 2,709,000 3,175,200Equity investment net generation (MWh) 1,579,700 1,555,000 314,500Total net generation (MWh) 24 38,749,683 42,481,775 45,002,276

Resource Use 25

Coal (tonnes) 12,698,500 14,880,300 17,851,900Natural gas (GJ) 68,131,600 64,944,800 58,230,300Diesel (GJ) 430,200 610,900 261,400Total vehicular gasoline consumption (L) 1,540,800 1,357,200 1,474,100Total vehicular diesel consumption (L) 36,568,900 36,278,800 40,959,900Total vehicular propane consumption (L) 159,400 105,800 135,900Building operations energy usage – energy (MWh) 209,800 223,900 215,000Building operations energy usage – natural gas (GJ) 70,600 75,800 72,400Building operations energy usage - propane (L) 48,500 71,200 63,600Building operations energy usage - kerosene (L) 101,000 63,500 54,800


Performance Indicators (continued)

Economic Performance 26 2012 2013 2014

Economic Value GeneratedRevenues ($ millions) 2,210 2,292 2,623Comparable EBITDA ($ millions) 27 1,015 1,023 1,036Net earnings (loss) attributable to common shareholders 28 (615) (71) 141

499 516 542303 280 280271 306 196

234 240 230102 (8) 728 27 29

Economic Value DistributedOperating costs 29

Employee compensation ($ millions) 29

Providers of capital – dividends (on common shares) ($ millions) 30

Providers of capital – interest ($ millions) 31

Payments to government – income tax expense ($ millions) 32

Payments to government – taxes, other than income taxes ($ millions) 33

Community investments ($ millions) 34 5 4 4

Economic Value Retained (Revenue minus Economic Value Distributed) 768 927 1,335

Investment in environment, research and technology ($ millions) 35 63 44 38

Social Performance 2012 2013 2014

Workplace PracticesNumber of employees 2,084 2,772 2,786Number of full-time employees 36 1,907 2,624 2,629Number of part-time employees 99 87 79Number of contingent employees 78 61 78EH&S full-time equivalent employees 37 99 87 79Employees represented by independent trade union organizations (%) 43 33 53Voluntary employee turnover rate (%) 38 10 10 10Total employee turnover rate (%) 39 19 15 14

Diversity 40

Women in workforce (%) 23 22 19Women in senior management (%) 19 32 35Workforce under age 30 (%) 13 13 12Workforce between ages 30 and 50 (%) 51 51 51Workforce over age 50 (%) 35 36 37

Training and DevelopmentHealth and safety training per employee (hours/employee) 10 7 14Environmental training per employee (hours/employee) 1 1 2Environment, health and safety training per employee (hours/employee) 41 11 7 16% of non-unionized employees receiving performance reviews 100 100 100


2,629Number ofFull-time Employees

Social Performance (continued) 2012 2013 2014

Health and Safety 42

Health and safety enforcement actions 43 0 0 0Health and safety fines ($ thousands) 0 0 0

Employee fatalities 3 0 0 0Lost time incident (LTI) (absence from work) 3 4 3 5Medical aids (MA) (no absence from work) 3 7 12 13Total injuries to employees 11 15 18Employee recordable (LTI & MA) injury frequency rate (injuries/200,000 hours) 44 3 0.50 0.74 0.96Employee disabling (LTI) injury frequency rate (injuries/200,000 hours) 45 3 0.18 0.15 0.27

Contractor fatalities 3 0 0 0Lost time incident (LTI) (absence from work) 3 4 0 0Medical aids (MA) (no absence from work) 3 16 14 4Total injuries to contractors 20 14 4Employee recordable (LTI & MA) injury frequency rate (injuries/200,000 hours) 44 3 1.55 1.27 0.58Contractor disabling (LTI) injury frequency rate (injuries/200,000 hours) 45 3 0.31 0.00 0.00

Employee and contractor IFR 3 0.89 0.93 0.86

Short-term disability rate (days/1,000 employees) 46 3 4,074 3,212 3,319Long-term disability rate (cases/1,000 employees) 47 3 6.24 4.33 7.54

Reportable vehicle incidents 34 42 37

Community RelationsCommunity investments ($ millions) 34 3 4.5 3.8 3.6Community investments per employee ($/employee) 2,172 1,384 1,310Company-initiated volunteer hours per employee/retiree (hours/employee) 48 3 8.7 8.6 9.8

3 Data has been third party assured to a limited assurance level by Ernst & Young LLP.Please see “Discussion and Notes on Numbers” section for footnote explanations. For performance indicator information broken down by country, view the full Data file at www.transalta.com/sustainability.


Discussion and Notes on Numbers

TransAlta continually strives to improve the accuracy, precision and extent of our sustainability performance reporting to stakeholders.

1. ISO 14001 and ISO 18001 are the worlds most recognized standards for Environmental Management and Health and Safety Management systems. TransAlta has ownership in 64 facilities. This data was previously misstated.2. Internal audits conducted against ISO management systems.3. Internal audits conducted against regulatory frameworks.4. Part of the Alberta Certificate of Recognition audit. Hence, only applicable in Alberta.5. Historic air emission intensities, 2012 and 2013, were restated in 2014. Generation data now aligns with financial reporting generation data,

matching what is reported in the TransAlta Corporation 2014 Annual Report, and is based on financial ownership. Intensities were previously calculated using generation data taken from operated facilities. Air emissions are reported from TransAlta operated facilities, where we report 100 per cent of emissions despite having a lower percentage of financial ownership in some facilities. Air emissions are expressed in tonnes, expect for mercury emissions, which is represented in kilograms.

6. GHG emissions were restated in 2012 and 2013 as a result of operational miscalculations of emissions from our Centralia facilities.7. Historic GHG emission intensities, 2012 and 2013, were restated in 2014. Generation data now aligns with financial reporting generation data,

matching what is reported in the TransAlta Corporation 2014 Annual Report, and is based on financial ownership. Intensities were previously calculated using generation data taken from operated facilities. GHG emissions are reported from TransAlta operated facilities, where we report 100 per cent of emissions despite having a lower percentage of financial ownership in some facilities. GHG emissions are expressed in tonnes.

8. Scope 1 GHG emissions are all direct GHG emissions. For example, coal or gas combusted in one of our plants.9. Scope 2 GHG emissions are all indirect GHG emissions. For example, the consumption of purchased electricity, heat and steam.10. For accuracy, mining land use was redefined in 2014 as: total land disturbed minus reclaimed area. Historical data, 2012 and 2013, has been

restated to reflect this calculation.11. Land disturbed and reclamation data has been restated for 2012 and 2013 due to adoption of an improved calculation methodology, which

is based on external sustainability guidelines. Centralia reclaimed data was also revised in 2014, certain data was being calculated in acres not hectares. The resulting change reduced our total percentage of land reclamation. Land reclaimed includes the percentage of mined land reclaimed at the Whitewood and Highvale coal mines at Wabamun, Alberta, and our surface mine in Centralia, Washington.

12. Non-hazardous waste was revised in 2014. Ash disposal totals were added in 2014; previously these were grouped with landfill totals (tonnes). Landfills totals (tonnes) were restated as a result. Recycled material (tonnes) includes metal recycled in 2014, not previously calculated, and historical totals have been restated to include these values. Wind metal recycle totals contributed to a higher value in 2014. Reuse and storage totals have also been added in 2014. Non-hazardous waste includes, but is not limited to, the disposal of water treatment chemicals, coal refuse (including ash by-products), paper, rubber, cardboard and building materials.

13. Ash disposal: mine is fly ash and bottom ash from coal production, which is treated and then returned to its original source, the mine, for landfill/disposal.

14. Ash disposal: lagoon is fly ash and bottom ash from Keephills coal production, which is treated and then sent to ash lagoons for disposal.15. Hazardous waste was revised in 2014. Historical landfill totals (tonnes) were restated as waste from Centralia was being double counted.16. Increase in 2014 volumes due to new requirements from Alberta Environmental Regulatory body, which requires leachable waste to be removed

from boilers during outages at coal facilities. During a 2014 outage at Keephills leachable waste from boilers was removed and sent to landfill.17. Water intake was revised to include additional water intake totals at our Sundance facility, previously calculated as a discharge. Mississauga

intake and discharge volumes have also been restated, due to more accurate data becoming available. Historical water intake and discharge totals have been restated to reflect these changes. Consumption totals adjusted as result. Total water consumed by TransAlta’s operations is measured by total water removed from the environment and total water returned to the environment. Water is used primarily for cooling by the thermal power plants and evaporative losses from the cooling ponds and cooling towers account for over 95 per cent of the consumptive use. The water lost to evaporation is not returned directly to the water body but the water remains in the hydrologic cycle. The amount of water used for domestic and boiler water usage amounts to less than five per cent of the total consumption.

We have reviewed our processes and controls relating to the measurement, calculation, consolidation and reporting of some of our key sustainability data. As a result, we have revised some historical data to reflect these improvements. If you would like additional information on the nature of the changes for specific indicators, please contact us at [email protected].

Several footnotes appear throughout the statistical summaries and are intended to provide clarity on specific boundary conditions, changes in methodology and definitions.

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18. Due to the methodology used to calculate water intake and discharge, the consumption intensity tends to be overstated as these figures do not account for precipitation gains or evaporation and transpiration losses from our cooling ponds.

19. Other environmental regulatory contraventions are incidents that may impact the environment, but are out of the scope of air, land and water contraventions that require reporting to an external regulatory agency. Examples could include equipment failures and permit non-compliance.

20. Administrative regulatory contraventions are incidents in breach of regulation, an order or requirement, or the terms of an authorization such as a permit or licence. An example could be a non-compliant lab analysis.

21. All contraventions are reported to an external regulatory agency, which may result in a fine, penalty or corrective action.22. Substances released to the environment include, but are not limited to ash, glycol, diesel, oils, and other chemicals.23. Net ownership capacity is based on financial ownership. Previous years have been restated to reflect financial net ownership. Please refer to our

Production Summaries for further detail: http://www.transalta.com/powering-investors/financial-and-annual-reports/production-summaries.24. Net generation is based on financial ownership. Previous years have been restated to reflect financial net generation. Please refer to our

Production Summaries for further detail: http://www.transalta.com/powering-investors/financial-and-annual-reports/production-summaries.25. Historical totals were restated in 2013 due to internal data revisions on coal and natural gas burn. Vehicle diesel consumption was restated in

2013 as result of more accurate data becoming available. Building operations energy use was restated in 2012 and 2013 due to recalculation of meters at our Centralia plant and mine.

26. Economic data is taken from the TransAlta Corporation 2014 Annual Report. Data has been presented as Economic Value Retained.27. “These items are not defined under IFRS. Presenting these items from period to period provides management and investors with the ability to

evaluate earnings and cash flow trends more readily in comparison with prior periods’ results. Refer to the Comparable Funds from Operations and Comparable Free Cash Flow, and Earnings and Other Measures on a Comparable Basis sections of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.” Refer to page 16 of the TransAlta Corporation 2014 Annual Report.

28. Refer to page 16 of the TransAlta Corporation 2014 Annual Report.29. Refer to page 107 (Note 5) of the TransAlta Corporation 2014 Annual Report Consolidated Financial Statements.30. Refer to page 89 of the TransAlta Corporation 2014 Annual Report Consolidated Financial Statements.31. Refer to page 90 of the TransAlta Corporation 2014 Annual Report Consolidated Financial Statements.32. Refer to page 111 (Note 10) of the TransAlta Corporation 2014 Annual Report Consolidated Financial Statements.33. Refer to page 43 of the TransAlta Corporation 2014 Annual Report Management’s Discussion and Analysis.34. Cumulative of donations and sponsorship totals in the respective calendar year.35. Environmental expenditures were restated in 2013 due to additional data becoming available. These expenditure totals include all expenditures

for environmental protection, such as environmental monitoring, pollution abatement, waste management and administrative costs. The increases of expenditures can be attributed to growth in site reclamation activities, pollution prevention and abatement technologies, and a focus on environmental protection and restoration of wildlife habitat.

36. Represents all TransAlta employees on December 31, 2014, inclusive of Sun Hills. SunHills was created during the 2013 business year. For the purposes of this report, a contingent employee is defined as a retired consultant, a temporary employee or a term employee.

37. All TransAlta employees who have full time Environment, Health and Safety roles. 38. Voluntary turnover rate includes voluntary leave for all full-time, part-time and contingent workers.39. Turnover rate includes dismissals and voluntary leave for all full-time, part-time and contingent workers.40. Age range workforce percentages do not include SunHills employee totals. SunHills was created during the 2013 business year.41. EH&S training per employee was misstated in 2012 and calculated based on FT employees not total employees.42. Corporate and Canadian health and safety data includes performance data from the Poplar Creek Power Station, as all employees at this site

are TransAlta employees and contractors hired by TransAlta.43. Health and safety incidents resulting in a regulatory enforcement action. Enforcement actions could take the form of a warning letter, fine or

non-financial reprimand or restriction on operations.44. The injury frequency rate (IFR) measures work-related medical aid and lost-time injuries per 200,000 hours worked. IFR is calculated using

a combination of actual and estimated exposure hours. During the course of the year, all work-related safety incidents are investigated. These investigations may provide new information which would result in an incident being reclassified.

45. The disabling injury frequency rate is calculated based on the number of injuries requiring absence from work (lost-time incidents) only.46. Reflects the number of days lost due to absenteeism from work, up to six months in duration. Absence may be due to work related incidents or

injuries incurred outside of work.47. Reflects the number of employees absent from work for more than six months. Absence may be due to work-related incidents or injuries

incurred outside of work. Historical 2013 values were restated to include SunHills employee totals. SunHills was created during the 2013 business year.

48. Volunteer activities organized by TransAlta such as volunteering work hours during United Way campaign and Volunteer Week in Canada. Number inclusive of TransAlta retiree group, which initiates volunteer opportunities for retirees and employees.

TransAlta Corporation110 - 12th Avenue SWBox 1900, Station “M”Calgary, AlbertaCanada T2P 2M1403.267.7110www.transalta.com

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TransAlta’s first sustainability report was published in 1994. This is our 21st report. For the past two decades, TransAlta has been a leader in advancing dialogue and disclosure about balancing the growing demand for electrical power with environmental, social and economic interests.





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