2022 Integrated Report
Energizing the Future.
WHO WE ARE
b
TransAlta Corporation • 2 022 Integrated Report
WHO WE ARE
Contents
2
President’s Message
5 Message from the Chair
6 Who We Are
14 Where We Are Going
16 How We Are Doing It
M1 Management’s Discussion and Analysis
F1 Consolidated Financial Statements
F12 Notes to Consolidated Financial Statements
252 Eleven-Year Financial and Statistical Summary
255 Plant Summary
257 Sustainability Performance Indicators
265 Independent Practitioner’s Assurance Report
269 Shareholder Information
273 Shareholder Highlights
274 Corporate Information
275 Glossary of Key Terms
TransAlta Corporation • 2 022 Integrated Report
Ghost Dam, Cochrane, AB
1
PRESIDENT’S MESSAGE
WHO WE ARE
In the fall of 2021, our executive team shared a vision for the
evolution of TransAlta and launched our Clean Electricity
Growth Plan at our investor day. We plotted a course to
reposition the company towards contracted renewable
generation, minimize our exposure to regulatory and carbon
risk, and diversify the company’s merchant position in Alberta.
We laid out a plan with a clear focus on capitalizing our cash
flow generation from the company’s unique legacy fleet in
both Alberta and Centralia, and investing those cash flows
towards the expansion and diversification of our contracted
renewables fleet to drive shareholder value. I am pleased
to say that our legacy generating fleet has performed well
and has positioned our company to fund its transition to
contracted renewables growth. Our strategy is on track and
is delivering consistent with our expectations. Our vision of
being a customer-centred leader in clean electricity committed to a sustainable future remains firm
and achievable.
John Kousinioris
President and Chief Executive Officer
Global Leader in Carbon Reductions
Today, we are on solid ground financially with a strategy that is aligned with, and resilient to, the
overall rapid pace of decarbonization which we are witnessing globally and which continues to drive
growing demand for renewable electricity. As countries move to set ever more stringent greenhouse
gas regulations and commitments, and as companies and consumers demand low-carbon energy
sources, we are positioning ourselves as a leader in renewable and hybrid generation. We believe
that over the next 10 years, electrification will be critical to lowering the carbon intensity of all that
is produced by our customers and communities. We are working side-by-side with our customers,
and in particular those in hard-to-decarbonize industries like petrochemicals and mining, to create
innovative power solutions to achieve significant reductions in carbon emissions. We are leaders in
carbon reduction our company has reduced GHG emissions by 68 per cent since 2015—a
remarkable milestone. Our carbon reductions alone have contributed to approximately 10 per cent
of Canada’s Paris Agreement target. We have been recognized by ESG rating agencies with an
A rating from MSCI and an A- rating from CDP. We are continually evaluating our progress and
this year we are also pleased to announce that we have accelerated our long-term decarbonization
goal by adopting a net-zero by 2045 target.
As I look back on 2022, the events that disrupted global energy markets brought to the forefront—
and into sharp focus—the need for balancing the three-legged stool of clean, reliable and
affordable electricity. This is the foundation that we focus on as we look at what customers and
consumers need as we move towards net zero. We believe that all forms of generation will be
required as we transition to a cleaner future and, uniquely, we have the capabilities to build and
operate across all forms of generation technologies and platforms in Canada, the United States
and Australia. We are making various investments in hydrogen and other areas to ensure we keep
abreast of technologies as they evolve. Our plan includes a commitment to invest $3.6 billion in
clean generation growth, and more importantly, our plan is funded and in execution.
Exceptional Business Performance
During the year, we successfully navigated market challenges and delivered exceptional results,
exceeding the top end of our revised guidance. Our free cash flow per share of $3.55, a 64 per
cent increase compared to 2021, is a remarkable result. The strong operational performance of our
fleet enabled us to successfully supply generation when the market needed it most and
benefitted
results
demonstrate the value of our strategically diversified fleet in Alberta. Although we are nearing
the peak of a supply cycle as more supply enters the Alberta market, we continue to believe we
have the right fleet to be the energy provider of choice. With our fast-ramping hydro and our
low-investment converted gas assets, we can provide cost-effective reliability when the
market needs it.
prices experienced
in Alberta. Our
strong
power
from
the
In 2022, we operated without any lost-time injuries across our global operations and delivered a
TransAlta Corporation • 2022 Integrated Report
22
PRESIDENT’S MESSAGE
WHO WE ARE
Total Recordable Injury Frequency (TRIF) rate across the entire fleet of 0.39, an outstanding result
and our best outcome ever. Availability was also excellent across our facilities, at 90.0 per cent
fleet-wide in 2022 as compared to 86.6 per cent in 2021.
We continue to maintain a strong financial position with over $2.1 billion in liquidity and are well
positioned to deliver on our Clean Electricity Growth Plan . We increased our annual dividend by 10
per cent to $0.22 per share, starting in January 2023, representing our fourth consecutive annual
increase. On top of that, we returned $54 million to shareholders over the year and will continue to
be supportive on share buybacks, especially during periods of weaker market pricing.
Clean Electricity Growth Plan Tracking to Delivery of 2 GW of Renewables
We remain confident in our ability to deliver on our Clean Electricity Growth Plan targets. In 2022,
we reached final investment decision on 200 MW with the addition of Horizon Hill in the US and
the Mount Keith transmission expansion in Australia. Although this was below our in-year growth
target, we were successful in adding 1,980 MW of development opportunities to our growth
pipeline which will set us up well for the future. For 2023, we have increased our growth target to
500 MW as we work towards our 2025 target of 2 GW.
We have 374 MW of advanced-stage projects that are a combination of wind, hydro-based storage
and gas technologies, and are now in discussions with various potential offtakers regarding these
opportunities. In 2022, we received Alberta Utilities Commission approval for our WaterCharger
battery storage project, an innovative 180 MW energy storage project outside of Calgary using
lithium-ion batteries. The project is another first-of-its kind in Alberta and will store must-run
energy generated by our Hydro fleet and discharge it into the Alberta grid at times of high-peak
demand. In addition, we currently have 678 MW of construction projects underway with over $1.35
billion allocated and we expect to see these projects reach the finish line throughout 2023. When
combined with the 122 MW North Carolina Solar acquisition, these projects will deliver adjusted
EBITDA of $149 million in 2024.
As we look forward to advancing our remaining development pipeline, we see inflationary and
supply pressures mounting with associated impacts on some of our development opportunities. We
have seen significant increases in turbine supply pricing and raw materials are also experiencing
significant price inflation. We estimate that current build costs for new assets have increased by
as much as 40 per cent compared to projects that were initiated only a year ago. Accordingly, we
have increased our Clean Electricity Growth Plan capital target from $3 billion to $3.6 billion to
reflect the new input pricing environment. However, despite the increases in capital costs, we are
seeing continued robust demand for renewable energy as corporate and government sustainability
commitments remain firm. PPA prices are adjusting to reflect supply and input cost pressures and,
accordingly, we have also adjusted upwards our EBITDA target from $250 million to $315 million
to reflect this dynamic. We continue to expect that our return requirements will remain intact for
our shareholders. The recent announcements regarding the Inflation Reduction Act in the United
States and the Fall Economic Statement in Canada are positive for our industry and company,
and will help drive renewable energy demand in both regions.
As we carry out our growth focus, we are investing in our development team to increase our
capabilities as a developer of choice and to expand, advance and convert our development
pipeline.
TransAlta — the Primary Growth Vehicle
Over time, the investment strategies of TransAlta and our subsidiary, TransAlta Renewables, have
converged. After extensive assessment, we clarified in December last year that TransAlta is best
positioned as the primary growth vehicle for the consolidated group. TransAlta’s development
pipeline, balance sheet strength, continuing strong free cash flow generation and low dividend
payout ratio supported our view that TransAlta Corporation was the best entity to deploy
significant capital allocation to contracted renewables growth. TransAlta Renewables continues to
be a critical asset for TransAlta. It will be principally focused on the sustainment of its dividend
in 2023 and beyond, with growth opportunities focused on organic expansions of its existing
assets through the execution of its rights of first offer with TransAlta and, potentially, through
dropdowns from TransAlta that could partially offset its tax horizon. TransAlta Renewables will
continue to allocate the majority of its highly contracted cash flows to dividends for its
shareholders.
TransAlta Corporation • 2 022 Integrated Report
TransAlta Corporation • 2 022 Integrated Report
3
3
PRESIDENT'S MESSAGE
Continued Focus on Environmental, Social and Governance
The significance of environmental, social and governance (ESG) has increased exponentially
over the past few years, being driven in large part by investors that are spending more time
understanding the sustainability of future cash flows and the human side of a company. TransAlta
has a long history of adopting leading sustainability practices, including more than 25 years of ESG
reporting, and the implementation of voluntarily integrating sustainability reporting into our
annual report since 2015.
We continue to drive industry-leading ESG practices within our Company. One area that we are
focusing on is improving our cultural awareness of the Indigenous communities across our global
operations. In 2022, this was a priority and I am proud to say that we completed the first year of our
journey by delivering Indigenous cultural awareness training to all employees in Canada. We
reached a completion rate of 100 per cent. This was important work, which will continue into 2023
as we carry out further training in the United States and Australia. This will ensure that we have a
common awareness across all of our Company in order to advance our strategy with sensitivity and
understanding towards the communities with whom we collaborate.
We are also on a cultural transformation journey by shifting the culture of our workplace towards a
greater focus on learning, purpose and results, while striving to create a psychologically safe
environment. I am particularly proud of one employee-driven initiative that brought this all
together for us last year and highlights how we have progressed as an organization. A group of our
employees developed a speaker series where employees from diverse backgrounds, ranging from
ethnicity, race and orientation, could share their past experiences. They brought their most
authentic selves and vulnerabilities to other employees across the company to promote
understanding and inclusion. It was amazing to see this level of psychological safety in action at
our workplace.
Preparing for 2024 and Beyond
I am spending my time in 2023 seeking ways to accelerate our growth strategy and ensure
TransAlta remains resilient within our changing market and regulatory landscape. We are focused
on identifying the opportunities and challenges that will push our company forward in
the latter part of the decade. We will share more of our thinking at our investor day in the
autumn of 2023.
2022 was truly a remarkable year for our company. Our success was a collective one and the
product of the individual efforts of each TransAlta employee. It has been an honour to lead an
organization of talented people with a commitment to delivering exceptional results while adhering
to our core values of safety, innovation, sustainability, respect, and integrity.
I would also like to express thanks to our Board of Directors for their support, guidance and
wisdom. They are committed to our company, its values and its mission to deliver the clean,
reliable and affordable electricity that the world needs now and in the future.
And to our shareholders, we welcome and value your perspectives and thank you for your continuing
commitment to TransAlta.
Last but definitely not least, we sincerely appreciate the support of all of our stakeholders and
thank our employees for all that they do to ensure we are powering and empowering our
economies and communities sustainably. I am pleased to report that there is every reason to
believe that our success will continue in 2023.
John H. Kousinioris
President and Chief Executive Officer
February 22, 2023
44
TransAlta Corporation • 2022 Integrated Report
MESSAGE FROM THE CHAIR
WHO WE ARE
As we report the financial results for the year ended December 31,
2022, I cannot understate the pride I have in the management team
and all the Company’s employees. Over the past five years, the
Company, under direction from the Board has materially reduced its
corporate-level debt, expanded its renewable portfolio and retired
or converted all of its Canadian coal generating assets to natural
gas-eight years ahead of the mandated elimination of emissions
from coal-fired generation. The Company has managed its evolution
with great skill and care for the benefit of our shareholders. It is
through the hard work and determination of your management team
that we are in a position to report that 2022 was the best year in our
operating history. We earned unprecedented performance from our
investments and our management team delivered exceptional free
cash flow for our shareholders. TransAlta has delivered performance
at all levels: financial, operational and safety.
John P. Dielwart
Chair of the Board of Directors
The Company’s strategy is on point and 2022 reflects the success of that execution. We have initiated a
capital allocation program where we are deploying the legacy cash flows of our transitioning merchant
thermal business and unique hydro fleet toward contracted renewables in order to pivot the Company
and generate long-term value for our shareholders. We have come a long way and today we are proud
to say we are truly a transition company and well-positioned as a credible and sought-after developer of
choice for customers. We are a clean power leader with a strong and dedicated focus on ESG; we have the
carbon reduction receipts in hand. We are in the strongest financial position that we have been in years
and are poised to grow where we can continue to add value to our shareholders and continue to shift our
Company more heavily towards contracted renewables. It is important to state that we will not grow the
business just for the sake of growth. Rates of return for renewable projects in certain jurisdictions need
to be adequate to achieve our target value creation objectives. Long term shareholder value creation will
drive our investment decisions and therefore dictate pace of growth.
On behalf of the Board, I would like to extend my gratitude to Ms. Beverlee Park for her long-term service
and significant contributions to the Company. She has been a valuable contributor to our Board since
2015 and we thank her for the leadership she provided, especially as Chair of the Audit, Finance and Risk
Committee of the Board. We wish her well in her retirement.
The upside to a Board retirement is that we are able to bring on additional talent to drive the evolution
of the Company. I am excited to welcome Ms. Manjit Sharma to our Board. She brings over 30 years of
experience spanning various industries and has been recognized among Canada’s top executives.
I also wish to acknowledge the nomination of Ms. Candace MacGibbon to the Board. She is a new
candidate director standing for election at our next annual meeting of shareholders. She brings over 25
years of experience in the mining sector and capital markets. We look forward to welcoming her to our
Company following her election to the Board at our annual meeting.
Your Board is extremely proud of the achievements this year of the management team at TransAlta and
grateful for the capable leadership of our President and Chief Executive Officer, John Kousinioris, and the
executive leadership team. We would like to recognize all the employees of TransAlta for their tireless
efforts in delivering an exceptional year in what has remained an unpredictable environment on so many
levels. The team has deftly managed and reacted to the uncertainty that is now inherent in the business
environment. We are also particularly proud that the team has continued to lead with our shared values,
all working together to embed a winning culture. The latter was particularly evident during the Company’s
President’s Awards recognizing the achievements of 2022 and which put on full display the values,
commitment, passion and intentionality all of our employees bring to TransAlta every day.
We also send special thanks to each of our shareholders for their continuing commitment to the Company.
We value your engagement and viewpoints to help form our own perspectives as to the evolution of the
Company.
The Board of Directors and I will continue to guide this Company toward delivering quality performance
to drive lasting shareholder value.
John P. Dielwart
Chair of the Board of Directors
February 22, 2023
TransAlta Corporation • 2 022 Integrated Report
TransAlta Corporation • 2 022 Integrated Report
5
5
WHO WE ARE
WHO WE ARE
Who We Are
TransAlta is a Canadian corporation and one of the country’s
largest publicly traded power generators. We own, operate
and manage a contracted and geographically diversified
portfolio of assets using a broad range of fuels including
hydro, wind, solar and natural gas.
6
6
TransAlta Corporation
TransAlta Corporation • 2 022 Integrated Report
WHO WE ARE
Our Vision
A leader in clean
electricity — committed
to a sustainable future
Our Mission
Provide safe, low-cost and reliable
clean electricity
Our Values
Safety
Ensure the health and safety of our people,
partners and stakeholders
Innovation
Develop and embrace innovative solutions
to challenges
Respect
Support our people, our partners, our
communities and our environment
Sustainability
Reduce the impact of resource use in
everything we do
Integrity
Focus on honesty, transparency and doing
what’s right
TransAlta Corporation • 2 022 Integrated Report
7
Wind and Solar
28 Facilities
Hydro
27 Facilities
Natural Gas
19 Facilities
Battery Storage
1 Facility
WHO WE ARE
Wind and Solar
28 Facilities
Coal
1 Facility
Fleet Overview
Hydro
27 Facilities
Natural Gas
19 Facilities
Battery Storage
1 Facility
Coal
1 Facility
Geographic Breakdown: International Reach
Geographic Breakdown: International Reach
Canada
Canada
We began in Alberta over 110 years
We began in Alberta over 111 years
ago with the construction of our first
ago with the construction of our first
hydro facility. Today, our operations
hydro facility. Today, our operations
span the country, providing the
span the country, providing the
electricity Canadians need every day.
electricity Canadians need every day.
Australia
Australia
TransAlta Energy Australia is
TransAlta Energy Australia is
building on our 20-year history
building on our 20-year history
in the country with significant
in the country with significant
new investments made over the
new investments made over the
past several years.
past several years.
United States
United States
Our United States operations
Our United States operations
began in Centralia, Washington.
began in Centralia, Washington.
Since then, our US fleet has
Since then, our US fleet has
expanded to include gas, hydro,
expanded to include gas, hydro,
solar and wind generation.
solar and wind generation.
1911
1911
First plant commissioned
First plant commissioned
4,914 MW
4,914 MW
Gross installed capacity
Gross installed capacity
56 Facilities
56 Facilities
Currently operating
Currently operating
1996
1996
First facility commissioned
First facility commissioned
450 MW
450 MW
Gross installed capacity
Gross installed capacity
6 Facilities
6 Facilities
Currently operating
Currently operating
2000
2000
First facility acquired
First facility acquired
1,219 MW
1,219 MW
Gross installed capacity
Gross installed capacity
10 Facilities
10 Facilities
Currently operating
Currently operating
(1) Skookumchuck dam in Washington State has been included in the Hydro facility count.
8
TransAlta Corporation • 2 022 Integrated Report
LEGEND
Wind
Solar
Battery
Hydro
Natural Gas
Energy Transition
Pipeline
Business Development Offices
LEGEND
Wind
Solar
Battery
Hydro
Natural Gas
Energy Transition
Pipeline
Business Development
Offices
LEGEND
Wind
Solar
Battery
Hydro
Natural Gas
Energy Transition
Pipeline
Business Development
Offices
LEGEND
Wind
Solar
Battery
Hydro
Natural Gas
Energy Transition
Pipeline
Business Development Offices
Wind and Solar28 FacilitiesHydro27 FacilitiesBattery Storage1 FacilityCoal1 FacilityNatural Gas17 FacilitiesWind and Solar29 FacilitiesHydro25 Facilities1Energy Transition1 Facility1Natural Gas17 Facilities Wind and Solar
28 Facilities
Wind and Solar
28 Facilities
Hydro
27 Facilities
Hydro
27 Facilities
Natural Gas
19 Facilities
Natural Gas
19 Facilities
Battery Storage
1 Facility
Battery Storage
1 Facility
Coal
1 Facility
Coal
1 Facility
WHO WE ARE
LEGEND
LEGEND
Wind
Wind
Solar
Solar
Battery
Battery
Hydro
Hydro
Natural Gas
Natural Gas
Energy Transition
Energy Transition
Pipeline
Pipeline
Business Development
Offices
Business Development
Offices
LEGEND
LEGEND
Wind
Solar
Battery
Hydro
Natural Gas
Wind
Energy Transition
Solar
Pipeline
Battery
Business Development Offices
Hydro
Natural Gas
Energy Transition
Pipeline
Business Development Offices
TransAlta Corporation • 2 022 Integrated Report
9
WHO WE ARE
TransAlta at a Glance
TransAlta owns, operates and develops a diverse fleet of electrical generation
assets in Canada, the United States and Australia. We provide municipalities,
medium and large industries, businesses and utility customers with clean,
affordable, energy-efficient and reliable power. Today, we are one of Canada’s
largest producers of wind power and Alberta’s largest producer of hydro-
electric power. For over a century, we’ve been committed to providing clean,
low-cost and sustainable electricity to power local communities.
$8.9 billion
Enterprise Value
Strong balance sheet
and capital discipline
111 years
Generation Experience
The foundation of our
focused strategy
$3.3 billion
Market Capitalization
Listed on the TSX and NYSE
Over 1,200
Employees
Central to value creation
~6,600 MW
Diversified and
Resilient Portfolio
72 generating facilities in
Canada, the United States
and Australia
~4+ GW
Growth Pipeline
Extensive and diversified
set of growth opportunities
10
TransAlta Corporation • 2 022 Integrated Report
WHO WE ARE
Awards & Recognition
TransAlta has been recognized in recent years for our performance as a responsible
operator and proud community member where we work and live. Our ESG performance
continues to be celebrated.
CDP Industry Leader Score of A-
This is above the North American regional average of C and represents the
highest score achieved by companies in the thermal power generation sector.
Globe and Mail Board Games Rank of 26 (a score of 90 out of 100)
Board Games assesses the work of Canada’s largest boards against a rigorous
set of governance criteria (well beyond the minimum set by regulators).
Bloomberg Gender-Equality Index (2020, 2021 and 2022)
A market capitalization-weighted index that aims to track the performance
of public companies committed to transparency in gender data reporting.
Globe and Mail Women Lead Here (2020, 2021 and 2022)
The Globe and Mail Women Lead Here list intends to set a benchmark for
gender diversity in corporate Canada.
Governance Gavel Award: Best Corporate Governance Disclosure
Canadian Coalition for Good Governance awards recognize excellence in
shareholder communications by issuers through their annual proxy circulars.
Energy Intelligence 2022 Green Utilities Report (2020 and 2021)
The annual Green Utilities Report ranks 100 companies among the largest power
generators from around the world, accounting for almost half of global capacity.
Diversio
First publicly traded energy company to be certified by Diversio for its Equity,
Diversity and Inclusion program.
The Queen’s University IRC Award for Best Learning &
Development Strategy
This award recognizes and celebrates the HR team that has delivered the
most outstanding organizational benefits by directly linking the training needs
of their people, at all levels, to the business needs of their organization.
Canadian Council for Aboriginal Business
Bronze-level Progressive Aboriginal Relations recognition of our Indigenous
partnerships and relationships.
United Way
United Way “Thanks a Million Award” annual recipient since 2001.
TransAlta Corporation • 2 022 Integrated Report
11
WHO WE ARE
Financial Highlights
Adjusted EBITDA1
($ millions)
2022 Adjusted EBITDA from Generation1,2
($ millions)
1,634
1,286
1,123
984
917
11%
5%
36%
30%
18%
$1,634
2018 2019 2020 2021
2022
$1,736
Hydro
Gas
Wind and Solar
Energy Transition
Energy Marketing
Free Cash Flow1
($ millions)
Free Cash Flow Per Share1
961
3.55
585
524
435
348
2.16
1.83
1.54
1.27
$961
2018 2019 2020 2021
2022
$3.55
2018 2019 2020 2021
2022
Earnings (Loss) Before Income Taxes
($ millions)
Cash Flow from Operating Activities
($ millions)
353
1,001
877
820
849
702
193
(96)
$353
(303)
(380)
2018 2019 2020 2021
2022
$877
2018 2019 2020 2021
2022
(1) Non‐IFRS measure. See pages M40 to M50 for details.
(2) Excludes the results from the Corporate segment and our equity investments.
12
TransAlta Corporation • 2 022 Integrated Report
WHO WE ARE
Hydro
Wind and Solar
Year ended Dec. 31
2022
2021 2020
Year ended Dec. 31
2022
2021 2020
Installed capacity (MW)3
922
925
925
Installed capacity (MW)3
1,906 1,906
1,572
Production (GWh)
1,988 1,936
2,132
Production (GWh)
4,248 3,898 4,069
Ancillary volumes (GWh) 3,124 2,897 2,857
Revenues2
Revenues2
Gross margin
Adjusted EBITDA1
607
585
527
383
367
322
152
144
105
Gross margin
Adjusted EBITDA1
407
375
311
348
331
262
334
309
248
Gas
Energy Transition
Year ended Dec. 31
2022
2021 2020
Year ended Dec. 31
2022
2021 2020
Installed capacity (MW)3 3,084 3,084 3,084
Installed capacity (MW)3
671
1,472 2,548
Production (GWh)
11,448 10,565 10,780
Production (GWh)
3,574 5,706 7,999
Revenues2
Gross margin
Adjusted EBITDA1
1,521
1,126
801
629
634
488
848
507
367
Revenues2
Gross margin
Adjusted EBITDA1
724
159
86
728
236
133
690
290
175
Energy Marketing
Corporate
Year ended Dec. 31
2022
2021 2020
Year ended Dec. 31
2022
2021 2020
Revenues2
Adjusted EBITDA1
218
183
202
166
133
103
OM&A
Adjusted EBITDA1
(101)
(102)
(84)
(85)
(80)
(81)
Consolidated
Year ended Dec. 31
2022
2021 2020
Installed capacity (MW)3 6,583 7,387
8,129
Total production (GWh) 21,258 22,105 24,980
Revenues4
2,976 2,721
2,101
Adjusted EBITDA1
1,634 1,286
917
(1) Non‐IFRS measure. See pages M40 to M50 for details.
(2) For details of the adjustments to revenues, included in adjusted EBITDA, refer to the Additional IFRS Measures and Non‐IFRS
Measures section of the MD&A.
(3) Gross installed capacity.
(4) In accordance with IFRS.
TransAlta Corporation • 2 022 Integrated Report
13
Wind and Solar28 FacilitiesHydro27 FacilitiesBattery Storage1 FacilityCoal1 FacilityNatural Gas17 FacilitiesWind and Solar29 FacilitiesHydro25 Facilities1Energy Transition1 Facility1Natural Gas17 FacilitiesWind and Solar28 FacilitiesHydro27 FacilitiesBattery Storage1 FacilityCoal1 FacilityNatural Gas17 FacilitiesWind and Solar29 FacilitiesHydro25 Facilities1Energy Transition1 Facility1Natural Gas17 FacilitiesWind and Solar28 FacilitiesHydro27 FacilitiesBattery Storage1 FacilityCoal1 FacilityNatural Gas17 FacilitiesWind and Solar29 FacilitiesHydro25 Facilities1Energy Transition1 Facility1Natural Gas17 FacilitiesWind and Solar28 FacilitiesHydro27 FacilitiesBattery Storage1 FacilityCoal1 FacilityNatural Gas17 FacilitiesWind and Solar29 FacilitiesHydro25 Facilities1Energy Transition1 Facility1Natural Gas17 Facilities WHERE WE ARE GOING
Where We
Are Going
We believe the current decade will be one of massive clean
energy expansion and we are excited about the role that
TransAlta will play. We have a proven track record along
with the expertise and experience to meet the challenge.
14
TransAlta Corporation • 2 022 Integrated Report
WHERE WE ARE GOING
Clean Electricity Growth
Plan Execution
2021
2025
Renewables
Growth
Growth
Capital
Incremental
EBITDA
40%
2021
2GW
2025
goal
41%
$3.6B
47%
$315M
2021
2025
goal
2021
2025
goal
Development
Pipeline
Targeted Adjusted
EBITDA
2021
60%
5GW
2025
goal
25%
374 MW
in Advanced-Stage
Development
5%
25%
5%
2025
70%
Renewables
Energy Marketing
Natural Gas
Renewables
Renewables
Energy Marketing
Energy Marketing
Natural Gas
Natural Gas
70%
Renewables
Energy Marketing
Natural Gas
2025
2030
5GW
of Growth Pipeline
2X
increase in Renewables Fleet
TransAlta Corporation • 2 022 Integrated Report
15
HOW WE ARE DOING IT
How We
Are Doing It
Our mission is to provide safe, low-cost and reliable clean electricity to
our customers. As a customer-centred clean energy leader, we are well
positioned to support our customers’ ESG and sustainability goals. To
achieve this goal in today’s evolving economy and increasingly electrified
world, our strategy focuses on renewable electricity growth and a deep
commitment to sustainability. We believe we are uniquely positioned as the
world continues to electrify and adopt sustainability practices.
16
TransAlta Corporation • 2 022 Integrated Report
HOW WE ARE DOING IT
Sustainability Targets
Achieving Results
Our 2023 and longer-term sustainability targets support the long term success of our business
so that the Company will continue to be positioned as an ESG leader in the future. Goals and
targets are established to improve our ESG performance and to manage current and emerging
material sustainability issues.
Nine UN SDGs we support:
2022 ESG Highlights
Performance against a selection of 2022 sustainability targets is highlighted below:
Environment
GHG emissions reduction
Social
Workforce diversity
Governance
Board diversity
Absolute
2015
baseline
75%
Gender
40%
Gender
2026
2026
goal
goal
0
2030
goal
0
50%
2030
goal
Down 68% from baseline
26% women
36% women
Clean Energy Transition
Delivering on Our Plan
We are a clean electricity leader with a focus on tangible greenhouse gas emissions reductions. We
have adopted a net-zero by 2045 target, and an ambitious CO2 emissions reduction target of 75%
by 2026 from 2015 levels. We also plan to deliver 2 GW of new renewables capacity by deploying
$3.6 billion of growth capital by the end of 2025.
TransAlta GHG Emissions (million tonnes CO2)
Emissions Reductions Targets
41.9
32.2
16.4
12.5
10.2
2005 2015 2020 2021
2022
8.1
2026
Target
0
2045
Target
75%
43%
40-45%
50-52%
Australia
Canada
US
TransAlta
Installed Renewable Capacity (MW)
Renewable Growth Capital1 ($ millions)
Solar
Wind
1,467
1,544
1,878
1,878
~3,750
2,680
3,830
666
158
326
2019
2020
2021
2022
2025 Target
2020
2021
2022
2023-2025
2020-2025
Cumulative Total
(1) See page M95 of the MD&A for details
TransAlta Corporation • 2 022 Integrated Report
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management’s Discussion
and Analysis
Table of Contents
M2 Forward-Looking Statements
M63 Financial Instruments
M4 Description of the Business
M64
Material Accounting Policies and Critical
Accounting Estimates
M5 Highlights
M71 Accounting Changes
M8 Significant and Subsequent Events
M12
Segmented Financial Performance and
Operating Results
M72
Environment, Social and Governance
("ESG")
Accelerating Our Business
Transformation to Become Net-Zero by
2045
M73
M20 Alberta Electricity Portfolio
M74 2023+ Sustainability Targets
M23 Fourth Quarter Highlights
M76 Our 2022 Sustainability Performance
M25
Segmented Financial Performance and
Operating Results for the Fourth Quarter
M78 Decarbonizing Our Energy Mix
M26 Selected Quarterly Information
M84 Key Climate Scenario Findings
M28 Financial Position
M30 Financial Capital
M36 Other Consolidated Analysis
M39 Cash Flows
M87
Managing Climate Change Risks and
Opportunities
M96
Enabling Innovation and Technology
Adoption
M100
Engaging with Our Stakeholders to
Create Positive Relationships
M107
Building a Diverse and Inclusive
Workforce
M40
Additional IFRS Measures and Non-IFRS
Measures
M109 Progressive Environmental Stewardship
M51
Financial Highlights on a Proportional
Basis of TransAlta Renewables
M116
Delivering Reliable, Low-Cost and
Sustainable Energy
M52 Key Non-IFRS Financial Ratios
M118 Sustainability Governance
M55 2023 Outlook
M119 Governance and Risk Management
M59 Strategy and Capability to Deliver Results
M133
Disclosure Controls
and Procedures
This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with our 2022 audited annual consolidated financial
statements (the "consolidated financial statements") and our 2022 annual information form ("AIF"), each for the fiscal year ended Dec. 31,
2022. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) for
Canadian publicly accountable enterprises as issued by the International Accounting Standards Board (“IASB”) and in effect at Dec. 31, 2022.
All dollar amounts in the tables are in millions of Canadian dollars unless otherwise noted and except amounts per share, which are in whole
dollars to the nearest two decimals. All other dollar amounts in this MD&A are in Canadian dollars, unless otherwise noted. This MD&A is
dated February 22, 2023. Additional information respecting TransAlta Corporation (“TransAlta”, “we”, “our”, “us” or the “Company”), including
our AIF, is available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov and on our website at www.transalta.com. Information on or
connected to our website is not incorporated by reference herein.
TransAlta Corporation • 2022 Integrated Report
M1
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-Looking Statements
This MD&A includes "forward-looking information" within the meaning of applicable Canadian securities laws
and "forward-looking statements" within the meaning of applicable United States ("US") securities laws,
including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as
"forward-looking statements"). All forward-looking statements are based on our beliefs as well as
assumptions based on information available at the time the assumptions were made and on management's
experience and perception of historical trends, current conditions and expected future developments, as well
as other factors deemed appropriate in the circumstances. Forward-looking statements are not facts, but
only predictions and generally can be identified by the use of statements that include phrases such as "may,"
"will," "can," "could," "would," "shall," "believe," "expect," "estimate," "anticipate," "intend," "plan," "forecast,"
"foresee," "potential," "enable," "continue" or other comparable terminology. These statements are not
guarantees of our future performance, events or results and are subject to risks, uncertainties and other
important factors that could cause our actual performance, events or results to be materially different from
that set out in or implied by the forward-looking statements.
In particular, this MD&A contains forward-looking statements including, but not limited to, statements relating
to: our Clean Electricity Growth Plan and ability to achieve the target of 2 gigawatts ("GW") of incremental
renewables capacity with an estimated capital investment of $3.6 billion that is expected to deliver
incremental average annual EBITDA of $315 million; the Company's projects under construction, including the
timing of commercial operations, expected annual EBITDA and associated costs, including the Horizon Hill
wind project, the White Rock wind projects, Northern Goldfields solar project, Garden Plain wind project and
the Mount Keith 132kV transmission expansion; the Montem pumped hydro development project and related
renewable projects; the execution of the Company's early, and advanced-stage development pipeline,
including the size, cost and expected EBITDA from such projects; the expansion of the Company's early stage
development pipeline to 5 GW; the proportion of EBITDA to be generated from renewable sources by the end
of 2025; the 2023 Financial Outlook (defined below), including adjusted EBITDA, free cash flow and
annualized dividend per share; the Company's ability to enhance shareholder value through its NCIB (as
defined below); the reduction of carbon emissions by 75 per cent from 2015 emissions levels by 2026; the
remediation of the Kent Hills 1 and 2 wind facilities, including, the timing and cost of such remediation, the
resulting impact of such rehabilitation on the Company's revenues and the potential battery storage project at
and repowering of, the Kent Hills facilities; the expected impact and quantum of carbon compliance costs;
regulatory developments and their expected impact on the Company, including the Canadian federal climate
plan and the implementation of the major aspects thereof (including increased carbon pricing and increased
funding for clean technology), the proposed new Clean Electricity Regulations, the Clean Fuel Regulations and
Canadian Greenhouse Gas Offset Credit System Regulations and the ability of the Company to realize
benefits from Canadian, United States and Australian regulatory developments, including receiving funding or
favourable tax treatment for clean electricity projects; the potential value of emission reduction credits;
modelling and scenario analysis associated with climate change management and the resiliency of the
Company's strategy under various climate scenarios; sustaining and productivity capital in 2023; expected
power prices in Alberta, Ontario and the Pacific Northwest; AECO gas prices; the cyclicality of the business,
including as it relates to maintenance costs, production and loads; expectations regarding refinancing debt
maturing from 2023 and 2025; and the Company continuing to maintain a strong financial position and
significant liquidity without any significant impact from the current economic environment.
The forward-looking statements contained in this MD&A are based on many assumptions including, but not
limited to, the following: no significant changes to applicable laws and regulations beyond those that have
already been announced; no significant changes to fuel and purchased power costs; no material adverse
impacts to long-term investment and credit markets; no significant changes to power price and hedging
assumptions, including Alberta spot prices of $105/MWh to $135/MWh in 2023, Mid-Columbia spot prices of
US$75/MWh to US$85/MWh in 2023, and AECO gas prices of $4.60/GJ in 2023; hedged volumes and prices
in 2023; sustaining capital of $140 million to $170 million in 2023; Energy Marketing gross margin of $90
million to $110 million in 2023; no significant changes to gas commodity prices and transport costs; no
significant changes to the decommissioning and restoration costs of the retired Alberta assets; no significant
changes to interest rates; no significant changes to the demand and growth of renewables generation; no
significant changes to the Company's debt and credit ratings; the Company's proportionate ownership of
TransAlta Renewables Inc. ("TransAlta Renewables") not changing materially; and no decline in the dividends
to be received from TransAlta Renewables.
TransAlta Corporation • 2022 Integrated Report
M2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Forward-looking statements are subject to a number of significant risks and uncertainties that could cause
actual plans, performance, results or outcomes to differ materially from current expectations. Factors that
may adversely impact what is expressed or implied by forward-looking statements contained in this MD&A
include risks relating to: force majeure claims; reduced labour availability and ability to continue to staff our
operations and facilities; disruptions to our supply chains, including our ability to secure necessary equipment;
our ability to obtain regulatory and any other third-party approvals on the expected timelines or at all in
respect of our growth projects; risks associated with development and construction projects, including as it
pertains to increased capital costs, permitting, labour and engineering risks, disputes with contractors and
potential delays in the construction or commissioning of such projects; restricted access to capital and
increased borrowing costs; significant fluctuations in the Canadian dollar against the US dollar and Australian
dollar; changes in short-term and long-term electricity supply and demand; fluctuations in market prices,
including lower merchant pricing in Alberta, Ontario and Mid-Columbia; reductions in production; a higher rate
of losses on our accounts receivable; inability to achieve our targets relating to ESG (as defined below);
impairments and/or write-downs of assets; adverse impacts on our information technology systems and our
internal control systems, including increased cybersecurity threats; commodity risk management and energy
trading risks, including the effectiveness of the Company’s risk management tools associated with hedging
and trading procedures to protect against significant losses; changes in demand for electricity and capacity
and our ability to contract our generation for prices that will provide expected returns and replace contracts
as they expire; changes to the legislative, regulatory and political environments in the jurisdictions in which
we operate; environmental requirements and changes in, or liabilities under, these requirements; disruptions
in the transmission and distribution of electricity; the effects of weather, including man-made or natural
disasters and other climate-change related risks; increases in costs; inability to satisfy the conditions to
closing of the acquisition of an interest in the Tent Mountain pumped hydro development project; reductions
to our generating units’ relative efficiency or capacity factors; disruptions in the source of fuels, including
natural gas, coal, water, solar or wind resources required to operate our facilities; operational risks, unplanned
outages and equipment failure and our ability to carry out or have completed any repairs in a cost-effective or
timely manner or at all, including as it applies to the remediation and replacement of turbine foundations of
the Kent Hills 1 and 2 wind facilities; general economic risks, including deterioration of equity markets,
increasing interest rates or rising inflation; failure to meet financial expectations; general domestic and
international economic and political developments; armed hostilities, including the war in Ukraine and
associated impacts; the threat of terrorism; adverse diplomatic developments or other similar events that
could adversely affect our business; industry risk and competition; fluctuations in the value of foreign
currencies; structural subordination of securities; counterparty credit risk; public health crisis risks, including
any further impacts of COVID-19; changes to our relationship with, or ownership of, TransAlta Renewables;
changes in the payment or receipt of future dividends, including from TransAlta Renewables; inadequacy or
unavailability of insurance coverage; our provision for income taxes and any risk of reassessment; legal,
regulatory and contractual disputes and proceedings involving the Company; reliance on key personnel; and
labour relations matters. The foregoing risk factors, among others, are described in further detail in the
Governance and Risk Management section of our 2022 Annual MD&A and the Risk Factors section in our AIF
for the year ended Dec. 31, 2022.
Readers are urged to consider these factors carefully in evaluating the forward-looking statements, which
reflect the Company's expectations only as of the date hereof and are cautioned not to place undue reliance
on them. The forward-looking statements included in this document are made only as of the date hereof and
we do not undertake to publicly update these forward-looking statements to reflect new information, future
events or otherwise, except as required by applicable laws. The purpose of the financial outlooks contained
herein is to give the reader information about management's current expectations and plans and readers are
cautioned that such information may not be appropriate for other purposes. In light of these risks,
uncertainties and assumptions, the forward-looking statements might occur to a different extent or at a
different time than we have described, or might not occur at all. We cannot assure that projected results or
events will be achieved.
TransAlta Corporation • 2022 Integrated Report
M3
MANAGEMENT'S DISCUSSION AND ANALYSIS
Description of the Business
Portfolio of Assets
TransAlta is a Canadian corporation and one of Canada's largest publicly traded power generators with over
111 years of operating experience. We own, operate and manage a geographically diversified portfolio of
assets utilizing a broad range of input resources that includes water, wind, solar, natural gas and thermal coal.
We are one of the largest producers of wind power in Canada and the largest producer of hydro power in
Alberta.
Our Clean Electricity Growth Plan, announced in 2021, will continue to advance our leadership position in
renewable electricity. In 2022, our renewable energy gross installed capacity is 2,828 MW and we have over
600 MW of renewable energy under construction.
TransAlta is actively transitioning our business to manage climate change risks and opportunities and has
demonstrated leadership through action on climate-change related issues. The Company no longer generates
electricity in Canada using coal. We have retired 4,464 MW of coal-fired generation capacity and converted
1,659 MW of coal-fired facilities to natural gas since 2018. Our remaining coal-fired unit in Washington State
is scheduled to retire at the end of 2025.
We are on track to achieve our target of reducing our greenhouse gas ("GHG") emissions by 75 per cent from
2015 levels by 2026. Since 2015, we have reduced GHG emissions by 22 million tonnes of CO2e or 68 per
cent.
The following table provides our consolidated ownership of our facilities across the regions in which we
operate as of Dec. 31, 2022:
As at Dec. 31, 2022
Gross installed capacity (MW)(1)
Alberta
Number of facilities
Canada,
Excluding
Alberta
Weighted average contract life
(years)(2)(3)(4)
Gross installed capacity (MW)(1)
Number of facilities
Weighted average contract life
(years)(3)
Gross installed capacity (MW)(1)
US
Number of facilities
Weighted average contract life
(years)(3)
Gross installed capacity (MW)(1)
Australia
Number of facilities
Weighted average contract life
(years)(3)
Gross installed capacity (MW)(1)
Total
Number of facilities
Weighted average contract life
(years)(3)
Hydro
834
17
—
88
7
6
—
—
—
—
—
—
922
24
1
Wind and
Solar
Gas
Energy
Transition
636
1,960
13
6
751
9
11
519
7
11
—
—
—
7
1
645
3
9
29
1
3
450
6
16
Total
3,430
37
2
1,484
19
10
—
—
—
—
—
—
671
1,219
2
3
—
—
—
10
7
450
6
16
1,906
3,084
671
6,583
29
10
17
5
2
3
72
6
(1) Gross installed capacity for consolidated reporting represents 100 per cent output of a facility. Capacity figures for the Wind and Solar
segment includes 100 per cent of the Kent Hills wind facilities; Gas includes 50 per cent of the Ottawa and Windsor facilities, 100 per cent
of the Poplar Creek facility, 50 per cent of the Sheerness facility and 60 per cent of the Fort Saskatchewan facility.
(2) The weighted average contract life for Hydro and certain gas and wind assets in Alberta are nil as they are operating primarily on a
merchant basis in the Alberta market. Refer to the Alberta Electricity Portfolio section of this MD&A for more information.
(3) For power generated under long-term power purchase agreements ("PPA"), power hedge contracts and short-term and long-term
industrial contracts, the PPAs have a weighted average remaining contract life based on long-term average gross installed capacity.
(4) The weighted average remaining contract life is related to the contract period for McBride Lake (38 MW), Windrise Wind (206 MW),
Poplar Creek (115 MW) and Fort Saskatchewan (71 MW), with the remaining wind and gas facilities operated on a merchant basis in the
Alberta market.
TransAlta Corporation • 2022 Integrated Report
M4
MANAGEMENT'S DISCUSSION AND ANALYSIS
Highlights
Consolidated Financial Highlights
Year ended Dec. 31
Adjusted availability (%)
Production (GWh)
Revenues
Fuel and purchased power
Carbon compliance
Operations, maintenance and administration
Adjusted EBITDA(1)(2)
Earnings (loss) before income taxes
Net earnings (loss) attributable to common shareholders
Cash flow from operating activities
Funds from operations(1)(2)
Free cash flow(1)(2)
Net earnings (loss) per share attributable to common shareholders, basic
and diluted
Dividends declared per common share(3)
Dividends declared per preferred share(3)
Funds from operations per share(1)(4)
Free cash flow per share(1)(4)
As at Dec. 31
Total assets
Total consolidated net debt(1)(5)
Total long-term liabilities
Total liabilities
2022
90.0
2021
86.6
2020
90.7
21,258
22,105
24,980
2,976
1,263
78
521
1,634
353
4
877
1,346
961
0.01
0.21
1.20
4.97
3.55
2022
10,741
2,854
5,864
8,752
2,721
1,054
178
511
1,286
(380)
(576)
1,001
994
585
2,101
805
163
472
917
(303)
(336)
702
675
348
(2.13)
(1.22)
0.19
1.02
3.67
2.16
2021
9,226
2,636
4,702
6,633
0.22
1.27
2.45
1.27
2020
9,747
2,974
5,376
6,311
(1) These items are not defined and have no standardized meaning under IFRS. Presenting these items from period to period provides
management and investors with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods’ results. Refer
to the Segmented Financial Performance and Operating Results section of this MD&A for further discussion of these items, including,
where applicable, reconciliations to measures calculated in accordance with IFRS. Also refer to the Additional IFRS Measures and Non-
IFRS Measures section of this MD&A.
(2) During 2022, our adjusted EBITDA composition was amended to include the impact of closed exchange positions that are effectively
settled by offsetting positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in
the period in which the transactions occur. Therefore, the Company has applied this composition to all previously reported periods.
(3) Weighted average of the Series A, B, C, D, E and G preferred share dividends declared. Dividends declared vary period over period due to
the timing of dividend declarations and quarterly floating rates.
(4) Funds from operations ("FFO") per share and free cash flow ("FCF") per share are calculated using the weighted average number of
common shares outstanding during the period. The weighted average number of common shares outstanding for the year ended Dec. 31,
2022, was 271 million shares (2021 – 271 million, 2020 – 275 million). Refer to the Additional IFRS Measures and Non-IFRS Measures
section of this MD&A for the purpose of these non-IFRS ratios.
(5) Total consolidated net debt includes long-term debt, including the current portion, amounts due under credit facilities, exchangeable
securities, US tax equity financing and lease liabilities, net of available cash and cash equivalents, the principal portion of restricted cash
on our subsidiary TransAlta OCP LP ("TransAlta OCP") and the fair value of economic hedging instruments on debt. Refer to the table in
the Financial Capital section of this MD&A for more details on the composition of total consolidated net debt.
TransAlta Corporation • 2022 Integrated Report
M5
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company exceeded the top end of its adjusted EBITDA and FCF guidance during the year with
exceptional performance in all of our generation segments as well as our Energy Marketing segment. The
Hydro and Gas facilities in the Alberta Electricity Portfolio were well positioned to capture opportunities from
the strong spot market conditions. Wind and Solar benefited from a full year of operations from the Windrise
wind and North Carolina Solar facilities. The Energy Transition segment had strong performance from
Centralia Unit 2, which was offset by the reductions related to the retirement of Keephills Unit 1 and
Sundance Unit 4.
Adjusted availability for 2022 was 90.0 per cent compared to 86.6 per cent in 2021. The increase was
primarily due to lower planned outages within the Gas segment with the completion of the coal-to-gas
conversions in 2021, higher reliability of the coal-to-gas converted units compared to coal units and lower
planned and unplanned outages at our Alberta Hydro Assets and Centralia Unit 2, partially offset by the
extended outage at the Kent Hills 1 and 2 wind facilities.
Production for 2022 was 21,258 gigawatt hours ("GWh") compared to 22,105 GWh in 2021. Overall, the
decrease in production was primarily due to the retirement of Keephills Unit 1 and Sundance Unit 4 and the
extended outage at the Kent Hills 1 and 2 wind facilities. This was partially offset by an increase in production
from the Gas segment due to higher availability and dispatch optimization of the Alberta assets; higher
production at the Ada cogeneration facility; the addition of the Windrise wind facility commissioned in the
fourth quarter of 2021, the North Carolina Solar facility acquired in the fourth quarter of 2021 and higher wind
resources in Eastern Canada, all in our Wind and Solar segment; and an increase in production from Centralia
Unit 2 in 2022 in our Energy Transition segment.
Revenues for 2022 increased by $255 million compared to 2021, mainly as a result of capturing higher
realized energy prices within the Alberta electricity market through our optimization and operating activities,
and higher realized ancillary services prices and volumes in the Hydro segment. Revenues net of realized and
unrealized losses from hedging and derivative positions also increased due to higher merchant prices and
volumes at Centralia. The Wind and Solar segment benefited from increased production and an increase in
emission credit sales over the prior year.
Fuel and purchased power costs in 2022 increased by $209 million compared to 2021. The Gas and Energy
Transition segments experienced higher natural gas pricing and there was increased natural gas consumption
from our recently converted units. This was partially offset by our hedged positions on gas, lower coal costs
and no mine depreciation due to the termination of all coal-mining activities in Canada as of Dec. 31, 2021.
Carbon compliance costs in 2022 decreased by $100 million compared to 2021, primarily due to reductions in
GHG emissions and utilization of our compliance credits to settle a portion of the GHG obligation, partially
offset by an increase in the carbon price per tonne and higher production in the Gas segment. Lower GHG
emissions were a direct result of operating exclusively on natural gas in Alberta rather than coal, resulting in
changes in the Company's fuel mix ratio.
Operations, maintenance and administration ("OM&A") expenses for 2022 increased by $10 million
compared to 2021. Excluding the impact of the Canada Emergency Wage Subsidy ("CEWS") funding received
in 2021, OM&A expenses were higher mainly due to the Company's performance-related incentive accruals,
OM&A related to the addition of the Windrise wind and North Carolina Solar facilities and higher general
operating expenses. In 2021, OM&A included $28 million related to a write-down on parts and material
inventory related to the Highvale mine and coal operations.
Adjusted EBITDA increased by $348 million compared to 2021, largely due to strong performance from our
Alberta Electricity Portfolio, driven primarily by the hydro, gas and wind facilities as a result of higher
merchant prices and dispatch optimization. Adjusted EBITDA was further improved by incremental production
from new facilities, higher ancillary service revenues, liquidated damages recoverable due to turbine
availability being below the contractual target at the Windrise wind facility, higher environmental attribute
revenues in the Wind and Solar segment and lower carbon compliance costs in both the Gas and Energy
Transition segments. This was partially offset by lower adjusted EBITDA from the retirement of Alberta coal
units in the Energy Transition segment, higher natural gas fuel costs, lower production from the extended
outage at the Kent Hills wind facilities, higher OM&A expenses related to the Company's performance-related
incentive accruals and increased general operating expenses. Changes in segmented adjusted EBITDA are
discussed in the Segmented Financial Performance and Operating Results section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M6
MANAGEMENT'S DISCUSSION AND ANALYSIS
Earnings before income taxes for 2022 increased by $733 million compared to 2021. Net earnings
attributable to common shareholders for 2022 were $4 million compared to a loss of $576 million in 2021. In
2022, the Company benefited from higher revenues net of realized and unrealized losses from hedging and
derivative positions and lower carbon compliance costs, partially offset by higher fuel and purchased power,
higher depreciation due to the acceleration of useful lives on certain facilities, higher interest expense due to
increased costs to support trading and hedging activities and higher accretion of provisions, partially offset
by higher interest income and higher income tax expense due to higher earnings before tax and current and
prior period tax adjustments in the US to mitigate cash tax. In addition, during 2022, the Company recognized
liquidated damages recoverable due to turbine availability being below the contractual target at the Windrise
wind facility. Net earnings attributable to common shareholders in 2021 were significantly impacted by higher
asset impairment charges resulting from the Company's decisions to shut down the Highvale mine, suspend
the Sundance Unit 5 repowering project and retire Sundance Unit 4 and Keephills Unit 1.
Cash flow from operating activities decreased by $124 million compared with 2021, primarily due to
unfavourable changes in working capital and higher fuel and purchased power costs. This was partially offset
by higher revenues from risk management activities, higher net other operating (income) loss and lower
carbon compliance costs.
FCF, one of the Company's key financial metrics, totalled $961 million compared to $585 million in 2021. This
represents an increase of $376 million, driven primarily by higher adjusted EBITDA, favourable changes in
provisions from 2021 and a decrease in sustaining capital spending related to fewer planned maintenance
turnarounds. This was partially offset by higher current income tax expense, higher distributions paid to
subsidiaries' non-controlling interests and higher decommissioning and restoration costs settled.
Ability to Deliver Financial Results
The metrics we use to track our performance are adjusted EBITDA and FCF. The following table compares
target to actual amounts for each of the three past years:
Year ended Dec. 31
Adjusted EBITDA (1)
FCF (1)
2022
2021
2020
Original Target
1,065-1,185
960-1,080
925-1,000
Revised Target(2)
Actual(3)
Original Target
Revised Target(2)
Actual(3)
1,380-1,460
1,200-1,300
1,634
1,286
n/a
917
455-555
340-440
325-375
725-775
500-560
961
585
n/a
348
(1) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated
in accordance with IFRS.
(2) In November 2022, as a result of the strong performance in the third quarter, the Company revised the outlook targets for adjusted
EBITDA and FCF from the previously announced target range. In 2021, the Company revised adjusted EBITDA and FCF as a result of
strong performance in the second and third quarters of 2021.
(3) The 2021 and 2020 actual adjusted EBITDA and FCF were revised during the second quarter of 2022 to be consistent with the currently
defined composition of adjusted EBITDA and FCF. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A
for further information.
Sustaining Capital
We are in a long-cycle, capital-intensive business that requires significant capital expenditures. Our goal is to
undertake sustaining capital expenditures that ensure our facilities operate reliably and safely.
Year ended Dec. 31
Total sustaining capital expenditures
2022
142
2021
199
2020
157
Total sustaining capital expenditures were $57 million lower compared to 2021, mainly due to lower planned
major maintenance turnarounds for the gas fleet as a result of coal-to-gas conversions being completed in
2021, partially offset by higher planned maintenance expenditures across the wind and hydro facilities, and
additional expenditures on leasehold improvements within the Corporate segment.
TransAlta Corporation • 2022 Integrated Report
M7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Significant and Subsequent Events
Early-Stage Pumped Hydro Development Project
On Feb. 16, 2023, the Company announced that it had entered into a definitive agreement to acquire a 50 per
cent interest in the Tent Mountain Renewable Energy Complex (“Tent Mountain”), an early-stage 320 MW
pumped hydro energy storage development project, located in southwest Alberta, currently owned by
Montem Resources Limited (“Montem”). The acquisition includes the land rights, fixed assets and intellectual
property associated with the pumped hydro development project. The Company will pay Montem
approximately $8 million upon closing the transaction with additional contingent payments of up to $17 million
(approximately $25 million total) based on the achievement of specific development and commercial
milestones. The Company and Montem will form a partnership and jointly manage the project, with the
Company acting as project developer. The partnership will actively seek an offtake agreement over the
development period for the energy and environmental attributes generated by the facility. The acquisition
also includes the intellectual property associated with a 100 MW offsite green hydrogen electrolyser and a
100 MW offsite wind development project. The closing of the transaction remains subject to customary
closing conditions, including receipt of shareholder approval by Montem which is expected to occur in March
2023.
TransAlta and Lafarge Canada Advance Low-Carbon Fly Ash Repurposing Project
During the fourth quarter of 2022, the Company entered into an agreement with Lafarge Canada that will
advance low-carbon concrete projects in Alberta. The project will repurpose landfilled fly ash, a waste
product from the Company's Canadian coal-fired electricity facilities, which ceased operating on coal at the
end of 2021. The ash will be used to replace cement in concrete manufacturing.
Changes to the Board of Directors
On Dec. 15, 2022, the Company announced the appointment of Ms. Manjit Sharma to the Board of Directors
(the “Board” or the “Board of Directors”) effective Jan. 1, 2023. Ms. Sharma brings over 30 years of
experience that spans a variety of industries, most recently serving as Chief Financial Officer of WSP Canada
Inc.
On Sept. 30, 2022, Ms. Beverlee Park retired from the Board of Directors. Ms. Park served on the Board of
Directors since 2015 and as Chair of the Audit, Finance and Risk Committee from April 2018 to May 2022. The
Company recognizes the many contributions made by Ms. Park to TransAlta, and thanks her for the many
years of service.
Public Offering of US$ Senior Green Bonds and Release of Inaugural Green Bond Framework
On Nov. 17, 2022, the Company issued US$400 million senior notes ("US$400 million Senior Green Bonds"),
which have a coupon rate of 7.75 per cent per annum and mature on Nov. 15, 2029. Including the effects of
settled interest rate swaps, the notes have an effective yield of approximately 5.98 per cent. The notes are an
unsecured obligation, rank equally in right of payment with all of our existing and future senior indebtedness,
and are senior in right of payment to all of our future subordinated indebtedness. The interest payments on
the bonds are made semi-annually, on November 15 and May 15, with the first payment commencing May 15,
2023.
The Company used the net proceeds from the issuance of the notes to repay $100 million drawn on its credit
facility and replaced the balance sheet cash used to fund the repayment in full of the Company’s US$400
million 4.50 per cent unsecured senior notes.
The Company will allocate an amount equal to the net proceeds from this offering to finance or refinance new
and/or existing eligible green projects in accordance with its Green Bond Framework (the “Framework”). The
Framework received a second-party opinion from Sustainalytics, which verified that it aligned with the Green
Bond Principles from the International Capital Market Association.
Announced a 10 per cent Common Share Dividend Increase
On Nov. 7, 2022, the Company announced that the Board of Directors approved a 10 per cent increase in its
common share dividend and declared a dividend of $0.055 per common share that was paid on Jan. 1, 2023.
The quarterly dividend of $0.055 per common share represents an annualized dividend of $0.22 per common
share.
TransAlta Corporation • 2022 Integrated Report
M8
MANAGEMENT'S DISCUSSION AND ANALYSIS
New Term Facility
During the third quarter of 2022, the Company closed a two-year $400 million floating-rate term facility
("Term Facility") with its banking syndicate with a maturity date of Sept. 7, 2024. As at Dec. 31, 2022, the full
amount was drawn on the Term Facility.
Conversion Results for Series E and F Preferred Shares
On Sept. 21, 2022, there were 89,945 Cumulative Redeemable Rate Reset First Preferred Shares, Series E
(“Series E Shares”) tendered for conversion, which was less than the one million shares required to give effect
to conversions into Cumulative Redeemable Rate Reset First Preferred Shares, Series F (“Series F Shares”).
As a result, no Series E Shares were converted into Series F Shares.
Executed Contract Renewals with the IESO at Sarnia Cogeneration and Melancthon 1 Wind
Facilities
During the third quarter of 2022, TransAlta Renewables Inc., a subsidiary of the Company, announced that it
was awarded capacity contracts for the Sarnia cogeneration facility and the Melancthon 1 wind facility from
the Ontario Independent Electricity System Operator (“IESO”) as part of the IESO’s Medium-Term Capacity
Procurement Request for Proposals. The new capacity contracts for the Sarnia cogeneration facility and the
Melancthon 1 wind facility run from May 1, 2026, to April 30, 2031. It is intended that the existing contracts for
the Sarnia cogeneration facility and the Melancthon 1 wind facility will be extended from Dec. 31, 2025 and
March 3, 2026, respectively, to April 30, 2026. The Company expects the gross margin from the Sarnia
cogeneration facility to be reduced by approximately 30 per cent as a result of the IESO price cap under the
new contract.
Executed Industrial Contract Extensions at Sarnia Cogeneration
During the second and fourth quarters of 2022, the Company executed contracts for the supply of electricity
and steam from the Sarnia cogeneration facility with three of its legacy industrial customers, and with three of
its new customers, who had previously been re-sold utilities as part of a legacy customer's contract.
Following the contracting efforts in 2021 and 2022, the Sarnia cogeneration facility has been fully re-
contracted without interruption to the customers' delivery terms. The contracts extend to April 30, 2031, for
four customers and to Dec. 31, 2032 for the other three customers.
TransAlta Debuts New Brand Reiterating Commitment to a Clean Energy Future
On June 20, 2022, the Company announced and launched a new brand, including company logo and tagline,
"Energizing the Future". The new visual identity encapsulates the TransAlta of today while reinforcing the
Company’s focus as a leader in creating a net-zero future.
Conversion Results for Series C and D Preferred Shares
On June 30, 2022, the Company converted 1,044,299 of its 11,000,000 Cumulative Redeemable Rate Reset
First Preferred Shares, Series C (“Series C Shares”), on a one-for-one basis, into Cumulative Redeemable
Floating Rate First Preferred Shares, Series D (“Series D Shares”).
Court of Appeal Upholds TransAlta’s Favourable Force Majeure Arbitration Decision
On June 9, 2022, the Alberta Court of Appeal released a unanimous decision dismissing ENMAX Energy
Corporation ("ENMAX") and the Balancing Pool's applications to set aside an arbitration decision in favour of
the Company. The Court of Appeal upheld the Company’s claim of force majeure that arose when its Keephills
Unit 1 generating unit was forced offline in 2013. As a result of the decision, the Company’s claim of force
majeure remains valid, and the associated costs of the force majeure event will not be reassessed against
TransAlta.
TransAlta Corporation • 2022 Integrated Report
M9
MANAGEMENT'S DISCUSSION AND ANALYSIS
Keephills Unit 2 Stator Force Majeure Dispute Settled
After the Keephills Unit 1 stator force majeure outage in 2013, it was determined that Keephills Unit 2 could
face a similar stator failure before the next planned outage. In response, the Company took Keephills Unit 2
offline between January 31, 2014, and March 15, 2014 to perform a full rewind of the generator stator and
claimed force majeure. The Balancing Pool disputed this force majeure event but the dispute was held in
abeyance pending the outcome of the Keephills Unit 1 stator force majeure dispute, which was recently
concluded. The Company and the Balancing Pool recently settled this dispute, resulting in the resolution of
both stator force majeure claims.
Kent Hills Wind Facilities Update
On June 2, 2022, TransAlta Renewables announced the rehabilitation plan for the Kent Hills 1 and 2 wind
facilities. In addition to the announcement, TransAlta Renewables amended and extended PPAs with New
Brunswick Power Corporation ("NB Power") in respect of each of the Kent Hills 1, 2 and 3 wind facilities,
providing for an additional 10-year contract term to December 2045 and an effective 10 per cent reduction to
the original contract prices from January 2023 through December 2033. In addition, both parties have agreed
to work in good faith to evaluate the installation of a battery energy storage system at Kent Hills and to
consider a potential repowering of Kent Hills at the end of life in 2045. A waiver for the Kent Hills wind non-
recourse bonds ("KH Bonds") was also obtained from the project bondholders and a supplemental indenture
was entered into with the bondholders that facilitates the rehabilitation of the Kent Hills 1 and 2 wind facilities.
Refer to the Wind and Solar segment discussion in the Segmented Financial Performance and Operating
Results section and Financial Capital section of this MD&A for further details.
TSX Acceptance of Normal Course Issuer Bid
On May 24, 2022, the Toronto Stock Exchange (“TSX”) accepted the notice filed by the Company to renew its
normal course issuer bid (“NCIB”) for a portion of its common shares. Pursuant to the NCIB, TransAlta may
repurchase up to a maximum of 14,000,000 common shares, representing approximately 7.16 per cent of its
public float of common shares as at May 17, 2022. Purchases under the NCIB may be made through open
market transactions on the TSX and any alternative Canadian trading platforms on which the common shares
are traded, based on the prevailing market price. Any common shares purchased under the NCIB will be
cancelled. The period during which TransAlta is authorized to make purchases under the NCIB commenced
on May 31, 2022, and ends on May 30, 2023, or such earlier date on which the maximum number of common
shares are purchased under the NCIB or the NCIB is terminated at the Company’s election.
The NCIB provides the Company with a capital allocation alternative with a view to ensuring long-term
shareholder value. TransAlta’s Board of Directors and management believe that, from time to time, the market
price of the common shares does not reflect their underlying value and purchases of common shares for
cancellation under the NCIB may provide an opportunity to enhance shareholder value.
During the year ended Dec. 31, 2022, the Company purchased and cancelled a total of 4,342,300 common
shares at an average price of $12.48 per common share, for a total cost of $54 million.
Mount Keith 132kV Transmission Expansion
On May 3, 2022, TransAlta Renewables exercised its option to acquire an economic interest in the expansion
of the Mount Keith 132kV transmission system in Western Australia that will support the Northern Goldfields-
based operations of BHP Nickel West ("BHP"). The project is being developed under the existing PPA with
BHP, which has a term of 15 years. It is expected to be completed in the second half of 2023. The project will
facilitate the connection of additional generating capacity to our network to support BHP's operations and
increase its competitiveness as a supplier of low-carbon nickel.
Executed Long-term PPA for the Remaining 30 MW at Garden Plain
During the second quarter of 2022, the Company entered into a long-term PPA for the remaining 30 MW of
renewable electricity and environmental attributes for the Garden Plain wind project in Alberta with a new
investment-grade globally recognized customer. The 130 MW Garden Plain wind project, which was
announced in May 2021 with a 100 MW PPA contracted to Pembina Pipeline Corporation ("Pembina"), is now
fully contracted with a weighted average contract life of approximately 17 years. Construction is underway
with commercial operation expected in the first half of 2023.
TransAlta Corporation • 2022 Integrated Report
M10
MANAGEMENT'S DISCUSSION AND ANALYSIS
Energy Impact Partners Investment
On May 5, 2022, the Company entered into a commitment to invest US$25 million over the next four years in
Energy Impact Partners ("EIP") Deep Decarbonization Frontier Fund 1 (the “Frontier Fund”). During 2022, the
Company invested $10 million (US$8 million). The investment in the Frontier Fund provides the Company with
a portfolio approach to investing in emerging technologies and the opportunity to identify, pilot,
commercialize and bring to market emerging technologies that will facilitate the transition to net-zero
emissions.
Customer Update at White Rock Wind Projects
During the second quarter of 2022, TransAlta identified Amazon Energy LLC (“Amazon”) as the customer for
the 300 MW White Rock wind projects, to be located in Caddo County, Oklahoma. On Dec. 22, 2021, Amazon
and TransAlta entered into two long-term PPAs for the supply of 100 per cent of the renewable electricity and
environmental attributes from the projects. Construction activities started in the fall of 2022 with a target
commercial operation date in the second half of 2023. TransAlta will construct, operate and own the facilities.
MSCI Environmental, Social and Governance Rating Upgrade
During the second quarter of 2022, TransAlta's MSCI Environmental, Social and Governance ("ESG") Rating
was upgraded to 'A' from 'BBB'. The upgrade reflects the Company's strong renewable energy growth
compared to peers. In 2021, the Company grew its installed renewable energy capacity by 15 per cent
through the acquisition and construction of solar and wind facilities and secured 600 MW in additional
renewable energy projects. In line with its goal to reduce carbon emissions by 75 per cent from 2015
emissions levels by 2026, TransAlta also completed coal-to-gas conversions of its Canadian coal-fired
facilities in 2021, nine years ahead of Alberta’s coal phase-out plan.
Horizon Hill Wind Project and Fully Executed Corporate PPA with Meta
On April 5, 2022, TransAlta announced a long-term renewable energy PPA with a subsidiary of Meta
Platforms Inc. ("Meta"), formerly known as Facebook, Inc., for 100 per cent of the generation from its 200 MW
Horizon Hill wind project to be located in Logan County, Oklahoma. Under this agreement, Meta will receive
both renewable electricity and environmental attributes from the Horizon Hill facility. The facility will consist
of a total of 34 Vestas turbines. Construction commenced in the fall of 2022 with a target commercial
operation date in the second half of 2023. TransAlta will construct, operate and own the facility.
TransAlta Corporation • 2022 Integrated Report
M11
MANAGEMENT'S DISCUSSION AND ANALYSIS
Segmented Financial Performance and Operating Results
Segmented information is prepared on the same basis that the Company manages its business, evaluates
financial results and makes key operating decisions.
Consolidated Results
The following table reflects the generation and summary financial information on a consolidated basis for the
year ended Dec. 31:
Year ended Dec. 31
2022
2021
2020
2022
2021
2020
2022
2021(4)
2020(4)
LTA generation (GWh)(1)
Actual production (GWh)(2)
Adjusted EBITDA(3)
Hydro
2,015
2,030 2,030
1,988
1,936
2,132
527
322
105
Wind and Solar
4,950
4,345 3,916 4,248
3,898 4,069
311
262
248
Renewables
6,965
6,375 5,946 6,236
5,834 6,201
838
584
353
Gas
Energy Transition
Energy Marketing
Corporate
Total
Earnings (loss) before
income taxes
11,448
10,565 10,780
629
488
367
3,574
5,706 7,999
86
133
175
183
166
103
(102)
(85)
(81)
21,258
22,105 24,980
1,634
1,286
917
353
(380)
(303)
(1) Long-term average production ("LTA Generation (GWh)") is calculated based on our portfolio as at Dec. 31, 2022, on an annualized basis
from the average annual energy yield predicted from our simulation model based on historical resource data performed over a period of
typically 30-35 years for the Wind and Solar segments and 36 years for Hydro segment. LTA Generation (GWh) for Energy Transition is
not considered as we are currently transitioning these units completely by the end of 2025 and the LTA Generation (GWh) for Gas is not
considered as it is largely dependent on market conditions and merchant demand. LTA Generation (GWh) for the year ended Dec. 31,
2022, excluding the Kent Hills 1 and 2 wind facilities which are currently not in operation, is approximately 4,563 GWh.
(2) Actual production levels are compared against the long-term average to highlight the impact of an important factor that affects the
variability in our business results. In the short-term, for each of the Hydro and Wind and Solar segments, the conditions will vary from one
period to the next and over time facilities will continue to produce in line with their long-term averages, which have proven to be reliable
indicators of performance.
(3) This item is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures
section of this MD&A.
(4) Adjustments to the Gas and Energy Marketing segment were made for the impact of realized gains and losses on closed exchange
positions. Refer to the Additional IFRS Measures and Non-IFRS Measures section under the Reconciliation of Non-IFRS Measures section
of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M12
Hydro
Year ended Dec. 31
Gross installed capacity (MW)(1)
LTA (GWh)
Availability (%)
Production
Contract production (GWh)
Merchant production (GWh)
Total energy production (GWh)
Ancillary service volumes (GWh)(2)
Alberta Hydro Assets revenues(3)
Other Hydro Assets and other revenues(3)(4)
Alberta Hydro ancillary services revenues(2)
Capacity payments(5)
Environmental attribute revenues
Total gross revenues
Net payment relating to Alberta Hydro PPA(6)
Revenues(7)
Fuel and purchased power
Gross margin(7)
OM&A
Taxes, other than income taxes
Adjusted EBITDA(7)
Supplemental Information:
Gross revenues per MWh
Alberta Hydro Assets energy ($/MWh)
Alberta Hydro Assets ancillary ($/MWh)
Sustaining capital
MANAGEMENT'S DISCUSSION AND ANALYSIS
2022
922
2,015
96.7
323
1,665
1,988
3,124
328
42
236
—
1
607
—
607
22
585
55
3
527
197
76
35
2021
925
2,030
92.4
434
1,502
1,936
2,897
185
41
160
—
1
387
(4)
383
16
367
42
3
322
123
55
26
2020
925
2,030
93.2
2,056
76
2,132
2,857
87
45
66
60
—
258
(106)
152
8
144
37
2
105
51
23
20
In the fourth quarter of 2022, the Company closed the sale of two Hydro assets resulting in a reduction in capacity of 3 MW.
(1)
(2) Ancillary services as described in the AESO Consolidated Authoritative Document Glossary.
(3) Alberta Hydro Assets include 13 hydro facilities on the Bow and North Saskatchewan river systems. Other Hydro assets includes our
hydro facilities in BC and Ontario, hydro facilities in Alberta (other than the Alberta Hydro Assets) and transmission revenues.
(4) Other revenue includes revenues from our transmission business and other contractual arrangements, including the flood mitigation
agreement with the Government of Alberta and black start services.
(5) Capacity payments include the annual capacity charge as described in the Power Purchase Arrangements Determination Regulation AR
175/2000, available from Alberta King's Printer. The PPA expired on Dec. 31, 2020.
(6) The net payment relating to the Alberta Hydro PPA represents the Company's financial obligations for notional amounts of energy and
ancillary services in accordance with the Alberta Hydro PPA that expired on Dec. 31, 2020. The amount in 2021 related to adjustments for
the final payment under the Alberta PPA.
(7) This item is not defined and has no standardized meaning under IFRS. For details of the adjustments to revenues and net other operating
income included in adjusted EBITDA refer to the Additional IFRS and Non-IFRS Measures section of this MD&A.
2022
Availability for 2022 increased compared to 2021, primarily due to lower planned and unplanned outages at
our Alberta Hydro Assets.
Production for 2022 increased by 52 GWh compared to 2021, mainly due to higher availability.
Ancillary services volumes for 2022 increased by 227 GWh compared to 2021, due to higher availability and
demand.
TransAlta Corporation • 2022 Integrated Report
M13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted EBITDA for 2022 increased by $205 million compared to 2021, primarily due to higher merchant
prices, higher production and higher ancillary service prices and volumes in the Alberta market. This was
partially offset by higher OM&A costs for the year related to increased insurance premiums for updated
replacement value coverage and the Company's performance-related incentive accruals. For further
discussion on the Alberta market conditions and pricing, refer to the Alberta Electricity Portfolio section of this
MD&A.
Sustaining capital expenditures for 2022 were $9 million higher compared to 2021, due to higher planned
maintenance in 2022.
2021
Availability for 2021 decreased compared to 2020, primarily due to higher planned and unplanned outages.
Production for 2021 decreased by 196 GWh compared to 2020, mainly due to lower availability and lower
precipitation.
Ancillary service volumes for 2021 increased by 40 GWh compared to 2020, in line with our expectations.
Adjusted EBITDA for 2021 increased by $217 million compared to 2020. Effective Jan. 1, 2021, with the
expiration of the Alberta PPA for our Alberta Hydro Assets, these facilities began operating on a merchant
basis in the Alberta power market. This eliminated the net payment obligations under the Alberta PPA. With
strong availability during periods of market volatility, the Company captured higher energy and ancillary
service revenue, partially offset by increased costs related to portfolio management services, dam safety
staffing, dredging and station services.
Sustaining capital expenditures for 2021 were $6 million higher than in 2020, due to higher planned outages
in 2021.
Wind and Solar
Year ended Dec. 31
Gross installed capacity (MW)(1)
LTA (GWh)
Availability (%)
Contract production (GWh)
Merchant production (GWh)
Total production (GWh)
Wind and Solar revenues
Environmental attribute revenues
Revenues(2)
Fuel and purchased power
Carbon compliance
Gross margin(2)
OM&A
Taxes, other than income taxes
Net other operating income(2)
Adjusted EBITDA(2)
Supplemental information:
Sustaining capital
Kent Hills wind rehabilitation expenditures(3)
Insurance proceeds - Kent Hills
2022
1,906
4,950
83.8
3,182
1,066
4,248
357
50
407
31
1
375
68
12
(16)
311
18
77
(7)
2021
1,906
4,345
91.9
2,850
1,048
3,898
320
28
348
17
—
331
59
10
—
262
13
—
—
2020
1,572
3,916
95.1
2,871
1,198
4,069
311
23
334
25
—
309
53
8
—
248
13
—
—
(1) The gross installed capacity in 2022 and 2021 includes incremental capacity related to new facilities: Windrise wind facility (206 MW),
North Carolina Solar facility (122 MW) and Oldman wind facility (4 MW).
(2) For details of the adjustments to revenues and net other operating income included in adjusted EBITDA refer to the Additional IFRS
Measures and Non-IFRS Measures section of this MD&A.
(3) The Kent Hills wind facilities rehabilitation capital expenditures are segregated from the sustaining capital expenditures due to the
extraordinary nature of the expenditures and have been reflected separately.
TransAlta Corporation • 2022 Integrated Report
M14
MANAGEMENT'S DISCUSSION AND ANALYSIS
2022
Availability for the year ended Dec. 31, 2022, decreased compared to 2021, primarily as a result of the
extended outage at the Kent Hills 1 and 2 wind facilities.
Production for the year ended 2022 increased 350 GWh compared to 2021, primarily due to higher production
from the addition of the Windrise wind facility and the acquisition of the North Carolina Solar facility in the
fourth quarter of 2021 and higher wind resources in Eastern Canada, partially offset by lower production from
the extended outage at the Kent Hills 1 and 2 wind facilities.
Adjusted EBITDA for 2022 increased by $49 million compared to 2021, primarily due to higher production,
higher realized merchant pricing in Alberta, higher environmental attribute revenues and the recognition of
liquidated damages recoverable from turbine availability being below the contractual target at the Windrise
wind facility. This was partially offset by lower production from the extended outage at Kent Hills, an increase
in transmission rates and OM&A related to the addition of the Windrise wind and North Carolina Solar
facilities. A one-time favourable adjustment as a result of the AESO transmission line loss ruling was included
in 2021.
Sustaining capital expenditures for 2022 were $5 million higher compared to 2021, due to a higher level of
major component replacements in 2022.
2021
Availability for the year ended Dec. 31, 2021, decreased compared to 2020, primarily as a result of the
unplanned outage at the Kent Hills 1 and 2 wind facilities.
Production for the year ended 2021 decreased 171 GWh compared to 2020 and was impacted by lower wind
resources in Eastern Canada and in the US, and the unplanned outage at the Kent Hills 1 and 2 wind facilities,
which was partially offset by a full year of production from the Skookumchuck wind facility, the
commissioning of the Windrise wind facility and the acquisition of the North Carolina Solar facility.
Adjusted EBITDA for 2021 increased by $14 million compared to 2020, primarily due to higher merchant
pricing in Alberta, a full year of operations from the Skookumchuck wind facility and the WindCharger battery
storage facility as well as incremental earnings from the newly commissioned or acquired assets in 2021,
consisting of the Windrise wind facility and the North Carolina Solar facility. Also, fuel and purchased power
costs were lower in 2021 due to the AESO transmission line loss provision recorded in 2020. Adjusted EBITDA
was negatively impacted by lower wind resources in Eastern Canada and the US, the unplanned outage at the
Kent Hills 1 and 2 wind facilities and the weakening US dollar relative to the Canadian dollar.
Sustaining capital expenditures for 2021 were consistent with 2020.
Kent Hills Rehabilitation
The Kent Hills 1 and 2 wind facilities are not currently in operation following the tower failure event that
occurred in September 2021. This event has taken approximately 150 MW of gross production offline
temporarily as the Company replaces all 50 turbine foundations at the Kent Hills 1 and 2 wind facilities. The
extended outage is expected to result in foregone revenue of approximately $3 million per month on an
annualized basis (to the extent all 50 turbines at the Kent Hills 1 and 2 wind facilities are offline), based on
average historical wind production, with revenue expected to be earned as the wind turbines are returned to
service. Each turbine at Kent Hills 1 and 2 wind facilities will return to service as soon as its foundation is
replaced and the turbine is reassembled and tested.
Rehabilitation for the Kent Hills 1 and 2 wind facilities is well underway. The majority of the towers have been
fully disassembled including foundation removal. Construction of new foundations is progressing well and the
team has now started to re-erect the first turbine tower segments on the new foundations. In addition, the
new wind turbine components to replace the damaged unit have been delivered to site. Rehabilitation is
targeted to be completed in the second half of 2023. The current estimate of the capital expenditures is
approximately $120 million, inclusive of insurance proceeds.
The Company is actively evaluating all options that may be available to recover the rehabilitation costs.
TransAlta Corporation • 2022 Integrated Report
M15
Gas
Year ended Dec. 31
Gross installed capacity (MW)
Availability (%)
Contract production (GWh)
Merchant production (GWh)
Purchased power (GWh)
Total production (GWh)
Revenues(1)
Fuel and purchased power(1)
Carbon compliance
Gross margin(1)
OM&A(1)
Taxes, other than income taxes
Net other operating income
Adjusted EBITDA(1)
Supplemental information:
Sustaining capital:
MANAGEMENT'S DISCUSSION AND ANALYSIS
2022
3,084
94.6
3,609
7,927
(88)
11,448
1,521
637
83
801
195
15
(38)
629
2021
3,084
85.7
3,622
7,084
(141)
2020
3,084
87.7
7,280
3,698
(198)
10,565
10,780
1,126
374
118
634
173
13
(40)
488
848
221
120
507
166
13
(39)
367
41
128
87
(1) For details of the adjustments to revenues, fuel and purchased power and OM&A included in adjusted EBITDA, refer to the Additional IFRS
Measures and Non-IFRS Measures section of this MD&A.
2022
Availability for the year ended Dec. 31, 2022, increased compared to 2021, primarily due to lower planned
outages with the completion of the coal-to-gas conversions in 2021 and higher reliability of the coal-to-gas
converted units compared to coal units.
Production for the year ended Dec. 31, 2022, increased by 883 GWh compared to 2021, mainly due to higher
availability and dispatch optimization of the Alberta assets and higher production at the Ada cogeneration
facility.
Adjusted EBITDA for the year ended Dec. 31, 2022, increased by $141 million compared to 2021, mainly due
to capturing higher realized energy prices through dispatch optimization of our Alberta assets, net of hedging,
higher Ontario merchant pricing, steam generation and lower carbon compliance costs. This was partially
offset by increased natural gas consumption on recently converted units, higher natural gas prices and higher
OM&A due to the Company's performance-related incentive accruals and increased general operating
expenses. Carbon compliance costs were lower due to reductions in GHG emissions and utilization of
compliance credits to settle a portion of the GHG obligation, partially offset by an increase in the carbon price
per tonne and higher production. Lower GHG emissions were a direct result of operating exclusively on
natural gas in Alberta rather than coal. Adjusted EBITDA for 2021 was also impacted by the unplanned short-
term steam supply outages at the Sarnia cogeneration facility in 2021.
Sustaining capital expenditures for the year ended Dec. 31, 2022, decreased by $87 million compared to
2021, due to the coal-to-gas conversions being completed in 2021.
2021
Availability for the year ended Dec. 31, 2021, decreased compared to 2020, primarily as a result of an
increase in unplanned outages and planned boiler conversions of Keephills Unit 2, Keephills Unit 3 and
Sheerness Unit 1 in Alberta, partially offset by higher availability of Sundance Unit 6 with its gas conversion
having been completed in 2020.
Production for the year ended Dec. 31, 2021, decreased by 215 GWh compared to 2020, mainly due to higher
portfolio optimization activities in Alberta and lower customer loads in Australia, partially offset by higher
demand at other facilities and incremental production from a full year of operations at the Ada cogeneration
facility.
TransAlta Corporation • 2022 Integrated Report
M16
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted EBITDA for the year ended Dec. 31, 2021, increased by $121 million compared to 2020, primarily due
to higher merchant pricing in the Alberta market, the South Hedland PPA contract settlement and incremental
production from a full year of operations at our Ada cogeneration facility, partially offset by an increase in fuel
costs, unplanned short-term steam supply outages at our Sarnia cogeneration facility, higher OM&A costs
related to the new projects being constructed under the PPA with BHP and legal fees related to the South
Hedland PPA contract settlement.
Sustaining capital expenditures for the year ended Dec. 31, 2021, increased by $41 million mainly due to major
maintenance costs associated with conversion to natural gas outages of Keephills Unit 2 and Unit 3 and
Sheerness Unit 1, planned major maintenance at the Australian gas facilities and the purchase of an additional
engine at the South Hedland facility.
Energy Transition
Year ended Dec. 31
Gross installed capacity (MW)(1)
Availability (%)
Adjusted availability (%)(2)
Contract sales volume (GWh)
Merchant sales volume (GWh)
Purchased power (GWh)
Total production (GWh)
Revenues(3)
Fuel and purchased power(3)
Carbon compliance
Gross margin(3)
OM&A(3)
Taxes, other than income taxes
Adjusted EBITDA(3)
Supplemental information:
Highvale mine reclamation spend
Centralia mine reclamation spend
Sustaining capital
2022
671
77.2
79.0
3,329
3,951
(3,706)
3,574
724
566
(1)
159
69
4
86
12
16
19
2021
1,472
75.3
78.8
3,329
6,052
(3,675)
5,706
728
432
60
236
97
6
133
6
9
19
2020
2,548
82.6
91.3
5,526
6,248
(3,775)
7,999
690
352
48
290
106
9
175
7
7
22
(1) The gross installed capacity for 2022, excludes Keephills Unit 1 (395 MW retired on Dec. 31, 2021) and Sundance Unit 4 (406 MW retired
on March 31, 2022). The gross installed capacity for 2021 excludes Centralia Unit 1 (670 MW retired on Dec. 31, 2020) and Sundance Unit
5 (406 MW).
(2) Adjusted for dispatch optimization.
(3) For details of the adjustments to revenues, fuel and purchased power and OM&A included in adjusted EBITDA refer to the Additional IFRS
Measures and Non-IFRS Measures section of this MD&A.
2022
Adjusted availability for the year ended Dec. 31, 2022, was consistent with 2021 as higher availability from
lower planned and unplanned outages at Centralia Unit 2 was partially offset by the retirements of Sundance
Unit 4 in 2022 and Keephills Unit 1 in 2021.
Production decreased by 2,132 GWh for the year ended Dec. 31, 2022, compared to 2021, primarily due to
the retirements of Keephills Unit 1 and Sundance Unit 4, partially offset by increased production from higher
availability at Centralia Unit 2.
TransAlta Corporation • 2022 Integrated Report
M17
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted EBITDA decreased by $47 million for the year ended Dec. 31, 2022, as compared to 2021, primarily
due to the retirement of the Alberta coal assets and higher purchased power costs during outages at
Centralia in 2022, partially offset by higher merchant and contract prices and higher production at Centralia,
lower carbon costs in Alberta related to utilization of our compliance credits to settle the 2021 GHG obligation
and lower OM&A as a result of the retirements on the coal fleet in 2021.
Mine reclamation spend for the Highvale and Centralia mines increased due to the advancement of
reclamation activities compared to 2021.
Sustaining capital expenditures for the year ended Dec. 31, 2022, was consistent compared to 2021.
2021
Adjusted availability for the year ended Dec. 31, 2021, decreased compared to 2020 due to higher planned
and unplanned outages at Centralia Unit 2 and Sundance Unit 4 related to derates.
Production decreased by 2,293 GWh for the year ended Dec. 31, 2021, compared to 2020, primarily due to
the planned retirement of Centralia Unit 1 and dispatch optimization of the Alberta assets.
Adjusted EBITDA decreased by $42 million for the year ended Dec. 31, 2021, compared to 2020, primarily due
to the planned retirement of Centralia Unit 1, higher fuel and purchased power costs due to unplanned
outages at Centralia Unit 2, higher carbon compliance costs for the Alberta assets primarily due to an
increase in carbon prices, and the weakening of the US dollar relative to the Canadian dollar throughout the
year, partially offset by dispatch optimization of the Alberta assets and lower OM&A as a result the planned
retirement of Centralia Unit 1.
Mine reclamation spend for the Highvale and Centralia mines was consistent compared to 2020.
Sustaining capital expenditures for the year ended Dec. 31, 2021, were $3 million lower than 2020 mainly due
to a reduction in planned outage work performed.
Energy Marketing
Year ended Dec. 31
Revenues(1)
OM&A
Adjusted EBITDA(1)
2022
2021
2020
218
35
183
202
36
166
133
30
103
(1) For details of the adjustments to revenues included in adjusted EBITDA, refer to the Additional IFRS Measures and Non-IFRS Measures
section of this MD&A.
2022
Adjusted EBITDA for 2022 increased by $17 million compared to 2021. Results exceeded segment
expectations due to short-term trading of both physical and financial power and gas products across all North
American deregulated markets. The Company was able to capitalize on short-term volatility in the trading
markets without materially changing the risk profile of the business unit.
2021
Adjusted EBITDA for 2021 increased by $63 million compared to 2020. Results were stronger primarily due to
favourable short-term trading of both physical and financial power, and natural gas products across all North
American markets. This was partially offset by OM&A increases due to higher incentives related to stronger
performance. The Energy Marketing team was able to capitalize on short-term volatility in the markets in
which we trade without materially changing the risk profile of the business unit.
TransAlta Corporation • 2022 Integrated Report
M18
MANAGEMENT'S DISCUSSION AND ANALYSIS
Corporate
Year ended Dec. 31
OM&A
Taxes, other than income taxes
Adjusted EBITDA
Adjusted EBITDA
Total return swap (gains) losses
CEWS funding received
CEWS funding applied to incremental employment
2022
101
1
(102)
2021
2020
84
1
(85)
80
1
(81)
(102)
(85)
(81)
1
—
5
(4)
(8)
3
3
—
—
Adjusted EBITDA excluding impact of total return swap and CEWS
(96)
(94)
(78)
Supplemental information:
Sustaining capital:
29
13
14
2022
Adjusted EBITDA for the year ended Dec. 31, 2022, decreased by $17 million compared to 2021, primarily due
to higher incentive accruals reflecting the Company's performance. The 2021 adjusted EBITDA was positively
impacted by the receipt of CEWS proceeds and gains on the total return swap.
For the year ended Dec. 31, 2022, sustaining capital expenditures increased by $16 million, compared to
2021, mainly due to higher spend on leasehold improvements associated with the relocation of the
Company's head office.
2021
Adjusted EBITDA for the year ended Dec. 31, 2021, decreased by $4 million compared to 2020, primarily due
to higher incentive payments, higher employee costs, higher insurance costs and higher legal fees for
settlement of outstanding legal issues, partially offset by the receipt of CEWS funding and realized gains from
the total return swap. A portion of the settlement costs of our employee share-based payment plans is
hedged by entering into total return swaps, which are cash settled every quarter. Excluding the impact of the
total return swap, staffing costs increased due to additional headcount to support growth initiatives. As
previously committed, the CEWS funding is being used to support incremental employment within the
Company.
For the year ended Dec. 31, 2021, sustaining capital expenditures were consistent with 2020.
TransAlta Corporation • 2022 Integrated Report
M19
MANAGEMENT'S DISCUSSION AND ANALYSIS
Performance by Segment with Supplemental Geographical Information
The following table provides adjusted EBITDA performance of our facilities across the regions we operate in:
Year ended Dec. 31, 2022
Hydro
Wind and
Solar
Energy
Transition(1)
Energy
Marketing(2)
Gas
Corporate
Total
Alberta
Canada, excluding Alberta
US
Australia
515
12
—
—
114
106
91
—
404
87
8
130
Adjusted EBITDA(3)
527
311
629
(18)
—
104
—
86
Earnings before income taxes
183
(102)
1,096
—
—
—
—
—
—
205
203
130
183
(102)
1,634
353
Year ended Dec. 31, 2021
Hydro
Wind and
Solar
Energy
Transition(1)
Energy
Marketing(2)
Gas
Corporate
Total
Alberta
308
63
263
Canada, excluding Alberta
US
Australia
Adjusted EBITDA(3)(4)
Loss before income taxes
14
—
—
120
79
—
75
10
140
59
—
74
—
166
(85)
—
—
—
—
—
—
774
209
163
140
322
262
488
133
166
(85)
1,286
(380)
(1) Keephills Unit 1 was retired Dec. 31, 2021, and Sundance Unit 4 was retired March 31, 2022.
(2) The adjusted EBITDA for the Energy Marketing segment was reclassified to the Alberta region to reflect where the operations reside.
(3) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Presenting this from period to period provides
management and investors with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods’ results. Refer
to the Segmented Financial Performance and Operating Results section of this MD&A for further discussion of these items, including,
where applicable, reconciliations to measures calculated in accordance with IFRS. Also, refer to the Additional IFRS Measures and Non-
IFRS Measures section of this MD&A.
(4) In 2022, adjustments to the Gas and Energy Marketing segments were made for the impact of realized gains and losses on closed
exchange positions for these segments in 2021. Also refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
Alberta Electricity Portfolio
Generating capacity in Alberta is subject to market forces, rather than rate regulation. Power from commercial
generation is cleared through a wholesale electricity market. Power is dispatched in accordance with an
economic merit order administered by the Alberta Electric System Operator ("AESO"), based upon offers by
generators to sell power in the real-time energy-only market. Our merchant Alberta fleet operates under this
framework and we internally manage our offers to sell power.
Approximately 52 per cent of our gross installed capacity is located in Alberta. Our portfolio of merchant
assets in Alberta consists of hydro facilities, wind facilities, a battery storage facility, cogeneration facilities
and converted natural-gas-fired thermal facilities. Some of the wind and gas facilities within the Alberta
Electricity Portfolio operate on long-term contracts. Optimization of portfolio performance is driven by the
diversity of fuel types, which enables portfolio management and allows for maximization of operating margins.
It also provides us with capacity that can be monetized as ancillary services or dispatched into the energy
market during times of supply tightness. A portion of the installed generation capacity in the portfolio has
been hedged to provide cash flow certainty.
TransAlta Corporation • 2022 Integrated Report
M20
MANAGEMENT'S DISCUSSION AND ANALYSIS
for
conditions
Alberta's annual demand increased approximately
1.7 per cent from 2021 to 2022, due to the
economic recovery from the COVID-19 pandemic,
higher residential cooling demand in summer and
stronger market
energy
commodities supporting power demand. The
average pool price increased from $102/MWh in
2021 to $162/MWh in 2022. Pool prices were
higher in the second through fourth quarters of
2022 compared to 2021, as a result of higher
demand in the province, higher natural gas and
carbon prices and stronger prices in an adjacent
power market. August and December, specifically,
were months with significant weather-driven
demand in the province.
2022
2021
2020
Year ended
Dec. 31
Hydro
Wind
&
Solar
Energy
Wind
&
Energy
Wind
&
Energy
Gas
Transition Total Hydro
Solar Gas
Transition Total Hydro
Solar Gas
Transition Total
Total
production
(GWh)(1)
Contract
production
(GWh)
Merchant
production
(GWh)
1,665
1,686
8,106
19
11,476 1,586 1,319
7,281
2,591 12,777 1,779 1,320
7,732
2,865 13,696
—
620
526
—
1,146
—
271
509
—
780 1,703
122
4,223
2,187 8,235
1,665
1,066
7,580
19
10,330 1,586 1,048
6,772
2,591 11,997
76
1,198
3,509
678
5,461
Revenues(2)
583
155
989
6
1,733
358
97
674
257 1,386 126
57
482
207 872
Fuel and
purchased
power(3)
18
21
442
5
486
13
9
258
92
372
6
15
151
73
245
Carbon
compliance —
1
70
(1)
70
—
—
96
60
156
—
—
120
48
168
Gross
margin
565
133
477
2
1,177
345
88
320
105
858
120
42
211
86
459
(1) Units in the Gas and Energy Transition segments in the prior periods operated on coal. Keephills Unit 1 was retired on Dec. 31, 2021, and
Sundance Unit 4 was retired on March 31, 2022.
(2) Revenue has been adjusted to exclude the impact of unrealized mark-to-market gains or losses and realized gains and losses on closed
exchange positions in order to depict revenue realized in the year.
(3) Adjustments to fuel and purchased power include the impact of coal mine depreciation and coal inventory write-downs at the Highvale
mine in 2021.
For the year ended Dec. 31, 2022, the Alberta Electricity Portfolio generated 11,476 GWh of energy, a
decrease of 1,301 GWh compared to 2021. Production was impacted by the retirement of Keephills Unit 1 on
Dec. 31, 2021, and Sundance Unit 4 on March 31, 2022. Lower production from the retirement of assets was
partially offset by higher contract production mainly due to the Windrise wind facility, commissioned in the
fourth quarter of 2021, and higher merchant production benefiting from higher availability in the Hydro
segment. Higher merchant production related to the Gas segment was due to more market opportunities for
our merchant gas fleet in the second half of 2022.
Gross margin for the year ended Dec. 31, 2022, was $1,177 million, an increase of $319 million compared to
2021. Higher merchant margins were realized through dispatch optimization and the increase in realized
power prices, which more than offset higher fuel costs from increased natural gas prices in 2022 as
compared to the prior year. Periods of strong weather-driven demand and unplanned outages resulted in
opportunities for each of our fuel types in the Alberta Electricity Portfolio throughout the year.
TransAlta Corporation • 2022 Integrated Report
M21
Cdn$/MWhAlberta Average Spot Electricity Prices$162$102$47202220212020
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table provides information for the Company's Alberta Electricity Portfolio:
Year ended Dec. 31
Spot power price average per MWh
Natural gas price (AECO) per GJ
Carbon compliance price per tonne
Realized merchant power price per MWh(1)(2)
Hydro energy spot power price per MWh
Hydro ancillary spot price per MWh
Wind energy spot power price per MWh
Gas and Energy Transition spot power price per MWh
Hedged volume (GWh)(2)(3)
Hedged power price average per MWh(2)
Fuel and purchased power per MWh(4)
Carbon compliance cost per MWh(4)
2022
$162
$5.08
$50
$126
$197
$76
$90
$194
2021
$102
$3.39
$40
$91
$122
$55
$63
$114
2020
$47
$2.11
$30
$64
$—
$—
$—
$—
7,228
6,992
5,395
$86
$60
$9
$72
$38
$16
$54
$23
$16
(1) Realized merchant power price for the Alberta Electricity Portfolio is the average price realized as a result of the Company's merchant
power sales (excluding assets under long-term contract and ancillary revenues) and portfolio optimization activities divided by total
merchant GWh produced. In 2020, the realized price was based on the average price realized as a result of the portfolio under PPAs.
(2) In 2020, the portfolio in Alberta was under PPAs and the PPA volumes are not included in the total hedged volumes listed above.
(3) Hedge volumes are for production volumes primarily from the Gas segment.
(4) Fuel and purchased power per MWh and carbon compliance cost per MWh are calculated on production from carbon-emitting generation
in the Gas and Energy Transition segments, and carbon compliance cost per MWh includes compliance credits to settle a portion of our
GHG carbon pricing obligations.
For the year ended Dec. 31, 2022, the realized merchant power price per MWh of production increased by
$35 per MWh, compared with the same period in 2021. Higher realized merchant power pricing for energy
across the fleet was due to higher market prices, increased price volatility and optimization of our available
capacity across all fuel types. The segment spot prices exclude gains and losses from hedging positions that
are entered into in order to mitigate the impact of unfavourable market pricing.
For the year ended Dec. 31, 2022, the fuel and purchased power cost per MWh of production increased by
$22 per MWh compared to the same period in 2021, due to higher natural gas pricing and higher fixed gas
transportation costs, partially offset by our hedge positions for gas prices and lower coal costs due to the
cessation of mining operations in 2021.
For the year ended Dec. 31, 2022, carbon compliance costs per MWh of production decreased by $7 per
MWh in the same period in 2021, due to lower carbon emissions from the retirement of our coal fleet and the
utilization of compliance credits to settle a portion of our GHG carbon pricing obligation for 2021. Carbon
compliance prices have increased to $50 per tonne from $40 per tonne; however, the shift to gas-fired
generation effectively lowered our GHG compliance costs as natural gas combustion produces lower GHG
emissions than coal combustion.
TransAlta Corporation • 2022 Integrated Report
M22
Fourth Quarter Highlights
Consolidated Financial Highlights
Three months ended Dec. 31
Adjusted availability (%)
Production (GWh)
Revenues
Fuel and purchased power(1)
Carbon compliance
Operations, maintenance and administration(1)
Adjusted EBITDA(2)(3)
Earnings (loss) before income taxes
Net loss attributable to common shareholders
Cash flow from operating activities
FFO(2)(3)
FCF(2)(3)
MANAGEMENT'S DISCUSSION AND ANALYSIS
2022
89.5
6,005
854
446
27
157
541
7
(163)
351
459
315
2021
83.8
5,823
610
266
39
130
243
(32)
(78)
54
186
79
Net loss per share attributable to common shareholders, basic and diluted
(0.61)
(0.29)
Dividends declared per common share(4)
Dividends declared per preferred share(4)
FFO per share(2)(5)
FCF per share(2)(5)
0.11
0.34
1.71
1.17
0.10
0.25
0.69
0.29
(1) In 2021, $6 million was reclassified from OM&A to fuel and purchased power for station service costs in the Hydro segment.
(2) These items are not defined and have no standardized meaning under IFRS. Refer to the Segmented Financial Performance and
Operating Results section of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures
calculated in accordance with IFRS. Also, refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
(3) During 2022, our adjusted EBITDA composition was amended to include the impact of closed exchange positions that are effectively
settled by offsetting positions with the same counterparty to reflect the performance of the assets and Energy Marketing segment in the
period in which the transactions occur. Therefore, the Company has applied this composition to all previously reported periods.
(4) Weighted average of the Series A, B, C, D, E and G preferred share dividends declared. Dividends declared vary year over year due to
timing of dividend declarations.
(5) Funds from operations ("FFO") per share and free cash flow ("FCF") per share are calculated using the weighted average number of
common shares outstanding during the period. The weighted average number of common shares outstanding for the three months ended
Dec. 31, 2022, was 269 million shares (2021 – 271 million shares). Refer to the Additional IFRS Measures and Non-IFRS Measures section
of this MD&A for the purpose of these non-IFRS ratios.
Financial Highlights
During the fourth quarter of 2022, the Company completed the year with exceptional performance in all of our
generation segments as well as our Energy Marketing segment. The Hydro, Wind and Gas facilities in the
Alberta Electricity Portfolio had high availability during periods of peak pricing, which resulted from extreme
cold weather and periods of province-wide planned and unplanned outages. The Alberta Electricity Portfolio
was positioned to capture opportunities from these strong spot market conditions through both energy and
ancillary services revenues.
Adjusted availability for the three months ended Dec. 31, 2022, was 89.5 per cent compared to 83.8 per
cent for the same period in 2021, mainly due to lower outages at our Alberta gas facilities and at Centralia
Unit 2.
Production for the three months ended Dec. 31, 2022, was 6,005 GWh compared to 5,823 GWh for the same
period in 2021. The increase in production for the three-month period in 2022 was due to higher availability of
the Alberta gas facilities within the Gas segment and Centralia Unit 2 within the Energy Transition segment,
partially offset by the retirement of Keephills Unit 1 and Sundance Unit 4.
TransAlta Corporation • 2022 Integrated Report
M23
MANAGEMENT'S DISCUSSION AND ANALYSIS
Revenues for the three months ended Dec. 31, 2022, increased by $244 million compared to the same period
in 2021, mainly as a result of capturing higher realized energy prices within the Alberta electricity market
through our optimization and operating activities and higher realized ancillary services prices and volumes in
the Hydro segment. Revenues further increased due to higher merchant prices and volumes at Centralia Unit
2. These increases were partially offset by the retirement of Keephills Unit 1 and Sundance Unit 4 within the
Energy Transition segment.
Fuel and purchased power costs increased by $180 million in the three months ended Dec. 31, 2022,
compared to the same period in 2021. The increase is due to higher natural gas prices and higher
consumption of natural gas within our Gas segment, partially offset by our hedged positions on gas, lower
coal costs and mine depreciation due to the termination of all coal-mining activities in Canada as of Dec. 31,
2021. In addition, fuel and purchased power costs at Centralia were higher from the acquisition of higher-
priced power to fulfil our contractual obligations during periods of higher merchant pricing at Centralia Unit 2.
Carbon compliance costs decreased by $12 million in the three months ended Dec. 31, 2022, compared to
the same period in 2021, primarily due to reductions in GHG emissions stemming from changes in the fuel mix
ratio as we operated more on natural gas and fired less with coal, partially offset by increased production and
an increase in the carbon price per tonne.
OM&A expenses for the three months ended Dec. 31, 2022, increased by $27 million, compared to the same
period in 2021, primarily due to higher incentive accruals reflecting the Company's performance and
increased staffing costs for growth and strategic initiatives.
Adjusted EBITDA for the three months ended Dec. 31, 2022, increased by $298 million compared to the
same period in 2021, largely due to higher adjusted EBITDA in our Hydro and Gas segments, which was driven
by higher realized prices in the Alberta market, higher adjusted EBITDA in the Wind and Solar segment from
higher wind resources in Eastern Canada and higher gross margin from our Energy Marketing segment. This
was partially offset by lower adjusted EBITDA in the Energy Transition segment from the retirement of
Keephills Unit 1 and Sundance Unit 4, partially offset by higher realized merchant prices and production at
Centralia Unit 2.
Net loss attributable to common shareholders in the fourth quarter of 2022 was $163 million compared to a
net loss of $78 million in the same period of 2021, an increase of $85 million. The net loss in 2022 was
impacted by higher depreciation and amortization expense due to the acceleration of useful lives on certain
facilities in our Gas segment, higher OM&A expenses and higher income tax expense due to higher earnings
before tax and current and prior period tax adjustments in the US to mitigate cash tax. These unfavourable
impacts were partially offset by lower asset impairments, higher gains on sale of assets and other due to the
timing of asset sales and higher adjusted EBITDA.
Cash flow from operating activities in the fourth quarter of 2022 increased by $297 million compared to the
same period in 2021, mainly due to higher revenues net of unrealized gains and losses from risk management
activities and favourable changes in working capital from movements in the collateral accounts related to high
commodity prices and volatility in the markets, partially offset by higher fuel and purchased power costs and
higher current income tax expense.
FCF in the fourth quarter of 2022 was $315 million compared to $79 million in the same period of 2021, as a
result of higher adjusted EBITDA due to Alberta Electricity Portfolio performance and favourable changes in
provisions from 2021, partially offset by higher current tax expense, higher distributions paid to subsidiaries'
non-controlling interests, higher realized foreign exchange losses, and higher sustaining capital expenditures.
TransAlta Corporation • 2022 Integrated Report
M24
MANAGEMENT'S DISCUSSION AND ANALYSIS
Segmented Financial Performance and Operating Results for the Fourth Quarter
A summary of our adjusted EBITDA by segment and earnings (loss) before income taxes for the three months
ended Dec. 31, 2022, and 2021 is as follows:
Three months ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Energy Marketing
Corporate
Total adjusted EBITDA
Earnings (loss) before income taxes
Adjusted EBITDA
2022
133
92
264
19
63
(30)
541
7
2021
67
76
103
37
(11)
(29)
243
(32)
Adjusted EBITDA increased by $298 million for the fourth quarter of 2022, compared to 2021, primarily as a
result of:
• Hydro results were $66 million higher due to increased revenues from higher merchant and ancillary
prices in the Alberta market.
• Wind and Solar results were $16 million higher due to higher merchant pricing in Alberta, higher wind
resource in Eastern Canada, higher environmental attribute revenue, higher revenues related to the
addition of the Windrise wind and North Carolina Solar facilities, and recognition of liquidated
damages recoverable from turbine availability being below the contractual target at the Windrise
wind facility.
• Gas results were $161 million higher mainly due to dispatch optimization and higher merchant prices,
net of hedging in Alberta and a contract settlement. This was partially offset by the higher cost of
natural gas and OM&A related to general operating expenses.
•
•
Energy Transition results were $18 million lower as a result of the retirement of Alberta coal assets,
partially offset by higher production and higher contract and merchant pricing at Centralia Unit 2.
Energy Marketing results were higher by $74 million compared to the same period in 2021. Results
exceeded expectations due to short-term trading of both physical and financial power and gas
products across all North American deregulated markets.
• Corporate costs were comparable to 2021.
TransAlta Corporation • 2022 Integrated Report
M25
MANAGEMENT'S DISCUSSION AND ANALYSIS
Selected Quarterly Information
Our results are seasonal due to the nature of the electricity market and related fuel costs. Higher maintenance
costs are often incurred in the spring and fall when electricity prices are expected to be lower; electricity
prices generally increase in the peak winter and summer months in our main markets due to increased heating
and cooling loads. Margins are also typically impacted in the second quarter due to the volume of hydro
production resulting from spring runoff and rainfall in the Pacific Northwest, which impacts production at
Centralia. Typically, hydroelectric facilities generate most of their electricity and revenues during the spring
months when melting snow starts feeding watersheds and rivers. Inversely, wind speeds are historically
greater during the cold winter months and lower in the warm summer months.
Revenues
Earnings (loss) before income taxes
Cash flow (used in) from operating activities(1)
Net earnings (loss) attributable to common shareholders
Net earnings (loss) per share attributable to common shareholders,
basic and diluted(2)
Revenues
Earnings (loss) before income taxes
Cash flow from operating activities
Net loss attributable to common shareholders
Net loss per share attributable to common shareholders,
basic and diluted(2)
Q1 2022
Q2 2022
Q3 2022
Q4 2022
735
242
451
186
458
(22)
(129)
(80)
929
126
204
61
854
7
351
(163)
0.69
(0.30)
0.23
(0.61)
Q1 2021
Q2 2021
Q3 2021
Q4 2021
642
21
257
(30)
619
72
80
(12)
850
(441)
610
(456)
610
(32)
54
(78)
(0.11)
(0.04)
(1.68)
(0.29)
(1) The cash flow used in operating activities for the second quarter of 2022 was due to unfavourable changes in working capital mainly due
to movements in our collateral accounts related to higher commodity prices and volatility in the markets.
(2) Basic and diluted earnings (loss) per share attributable to common shareholders is calculated in each period using the weighted average
common shares outstanding during the period. As a result, the sum of the earnings (loss) per share for the four quarters making up the
calendar year may sometimes differ from the annual earnings (loss) per share.
TransAlta Corporation • 2022 Integrated Report
M26
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net earnings (loss) attributable to common shareholders has also been impacted by the following variations
and events:
• Higher revenues arising from higher overall availability during periods of peak pricing and higher
power prices in Alberta in 2022;
• Higher natural gas pricing and increased natural gas consumption for the units that were converted
to gas in 2021 and 2020;
•
•
•
•
•
•
•
•
•
Lower carbon costs in 2022 related to our transition off coal and the utilization of renewable energy
compliance credits to settle a portion of our GHG obligation in the second quarter of 2022;
The continued extended outage of the Kent Hills 1 and 2 wind facilities from the fourth quarter of
2021 through the fourth quarter of 2022. The extended outage is expected to continue into 2023;
The effects of asset impairment charges and reversals during all periods shown;
The effects of changes in decommissioning provisions for retired assets from changes in estimated
cash flows and discount rates in all periods shown;
Accelerated timing of decommissioning cash flows and changes in useful lives recognized in the third
quarter of 2022;
Insurance proceeds for the single tower failure at Kent Hills wind facilities of $7 million recognized in
the second quarter of 2022;
Liquidated damages recoverable from turbine availability being below the contractual target at the
Windrise wind facility were recorded in each of the quarters in 2022;
Keephills Unit 1 being retired in the fourth quarter of 2021 and Sundance Unit 4 being retired in the
first quarter of 2022;
Acquisition of North Carolina Solar facility in the fourth quarter of 2021;
• Commissioning of the Windrise wind facility in the fourth quarter of 2021;
•
•
The suspension of the Sundance Unit 5 repowering project in the third quarter of 2021;
The retirement of the Sundance Unit 5 during 2021;
• Gains relating to the sales of assets being recognized in the fourth quarter of 2022, the sale of the
Pioneer Pipeline in the second quarter of 2021 and gains on sale of Gas equipment in the third
quarter of 2021;
•
•
•
•
The unplanned steam supply outages at the Sarnia facility in the second quarter of 2021;
Receipt of CEWS funding in 2021;
Accelerated plans to shut down the Highvale mine resulting in remaining future royalty payments
being recognized as an onerous contract in the third quarter of 2021;
Accelerated shutdown of the Highvale mine increasing mine depreciation included in the cost of coal.
Coal inventory write-down incurred in the first three quarters of 2021;
• Coal-related parts and materials inventory write-down incurred in the second and third quarters of
2021;
•
•
The impact of the updated provision estimates for the AESO transmission line loss ruling during the
first quarter of 2021;
Fluctuations in the Canadian dollar relative to the US dollar resulting in foreign exchange gains and
losses on our US denominated long-term debt balances not designated as hedges; and
• Current and future tax expense fluctuating with earnings before tax across the quarters. Future tax
expense increased from 2021 mainly due to a deferred tax write-down taken against part of the
Canadian operations and losses on mark-to-market hedging.
TransAlta Corporation • 2022 Integrated Report
M27
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Position
The following table highlights significant changes in the Consolidated Statements of Financial Position from
Dec. 31, 2021, to Dec. 31, 2022:
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Risk management assets
Other current assets(1)
Total current assets
Non-current assets
Risk management assets
Property, plant and equipment, net
Other non-current assets(2)
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Risk management liabilities
Long-term debt and lease liabilities (current)
Other current liabilities(3)
Total current liabilities
Non-current liabilities
Credit facilities, long-term debt and lease liabilities
Decommissioning and other provisions (long-term)
Risk management liabilities (long-term)
Defined benefit obligation and other long-term liabilities
Other non-current liabilities(4)
Total non-current liabilities
Total liabilities
Equity
Equity attributable to shareholders
Non-controlling interests
Total equity
Total liabilities and equity
Dec. 31, 2022
Dec. 31, 2021
Increase/
(decrease)
1,134
1,589
709
282
3,714
161
5,556
1,310
7,027
10,741
1,346
1,129
178
235
2,888
3,475
659
333
294
1,103
5,864
8,752
1,110
879
1,989
10,741
947
651
308
291
2,197
399
5,320
1,310
7,029
9,226
689
261
844
137
1,931
2,423
779
145
253
1,102
4,702
6,633
1,582
1,011
2,593
9,226
187
938
401
(9)
1,517
(238)
236
—
(2)
1,515
657
868
(666)
98
957
1,052
(120)
188
41
1
1,162
2,119
(472)
(132)
(604)
1,515
(1) Includes restricted cash, prepaid expenses, inventory and assets held for sale.
(2) Includes investments, long-term portion of finance lease receivables, right-of-use assets, intangible assets, goodwill, deferred income
tax assets and other assets.
(3) Includes bank overdraft, current portion of decommissioning and other provisions, current portion of contract liabilities, income taxes
payable and dividends payable.
(4) Includes exchangeable securities, deferred income tax liabilities and contract liabilities.
TransAlta Corporation • 2022 Integrated Report
M28
MANAGEMENT'S DISCUSSION AND ANALYSIS
Significant changes in TransAlta's Consolidated Statements of Financial Position were as follows:
Working Capital
Current assets increased by $1,517 million to $3,714 million as at Dec. 31, 2022, from $2,197 million as at Dec.
31, 2021, primarily due to strong Alberta pricing which has increased operating cash flow and higher trade
and other receivables due to higher revenue, along with higher collateral posted and higher risk management
assets resulting from volatility in market prices. As at Dec. 31, 2022, the Company had provided $304 million
(2021 – $55 million) of cash collateral related to derivative instruments in a net liability position.
Current liabilities increased by $957 million from $1,931 million as at Dec. 31, 2021, to $2,888 million as at
Dec. 31, 2022, mainly due to an increase in accounts payable and accrued liabilities due to higher payables
for increased construction activities. Additionally, higher payables in the Energy Market segment, higher
collateral received associated with counterparty obligations and an increase in risk management liabilities
arose primarily due to volatility in market prices across multiple markets. These increases were partially offset
by the repayment of the US$400 million of 4.50 per cent unsecured senior notes due in 2022 and the
reclassification of the KH Bonds of $206 million to long-term liabilities as the Company obtained a waiver and
entered into a supplemental indenture that facilitated the rehabilitation of the Kent Hills 1 and 2 wind facilities
which supported the reclassification to long-term debt. As at Dec. 31, 2022, the Company held $260 million
(2021 – $18 million) of cash collateral received related to derivative instruments in a net asset position.
The excess of current assets over current liabilities, including the current portion of long-term debt and lease
liabilities, was $826 million as at Dec. 31, 2022 (2021 – $266 million). Our working capital increased year over
year mainly due to the reclassification of the KH Bonds from current to long-term liabilities, as well as the
repayment of the US$400 million of 4.50 per cent unsecured senior notes due in 2022. The year-over-year
increase was also due to an increase in cash of $187 million and higher trade and other receivables of $938
million due to strong Alberta merchant pricing, including higher collateral provided, and higher risk
management assets of $401 million primarily from volatility in market prices. The increase was partially offset
by higher accounts payable, including collateral held, of $657 million and higher risk management liabilities of
$868 million primarily from the volatility in market prices. Excluding the current portion of long-term debt and
lease liabilities of $178 million (2021 – $844 million), the excess of current assets over liabilities was $1,004
million as at Dec. 31, 2022 (2021 – $1,110 million), slightly lower than the prior year.
Non-Current Assets
Non-current assets as at Dec. 31, 2022, were $7,027 million, a decrease of $2 million from $7,029 million as
at Dec. 31, 2021. The decrease was mainly due to lower risk management assets due to volatility in market
pricing across multiple markets and contract settlements, primarily offset by an increase in property, plant
and equipment ("PP&E"). Additions to PP&E of $918 million were mainly for the construction of the White Rock
wind projects, the Garden Plain wind project, the Horizon Hill wind project, the Northern Goldfields solar
project and the Kent Hills rehabilitation costs, and other planned major maintenance. The increases to PP&E
were partially offset by revisions and additions to decommissioning and restoration costs of $74 million, the
impairment of assets of $62 million and depreciation of $538 million.
Non-Current Liabilities
Non-current liabilities as at Dec. 31, 2022, were $5,864 million, an increase of $1,162 million from $4,702
million as at Dec. 31, 2021, mainly due to a $1,052 million increase in long-term debt and lease liabilities
related to the Company entering into a two-year $400 million floating rate Term Facility, which was fully
drawn at Dec. 31, 2022, and the issuance of the US$400 Senior Green Bonds. The KH Bonds were also
reclassified to long-term debt in 2022 as a result of the waiver obtained. This was offset by the non-recourse
bonds of Pingston Power Inc. being reclassified to current liabilities during 2022. The increase in risk
management liabilities of $188 million is due to the volatility across multiple markets and new contracts, and is
offset by lower decommissioning and other provisions of $120 million, and lower defined benefit obligation
and other long-term liabilities of $41 million.
Total Equity
As at Dec. 31, 2022, the decrease in total equity of $604 million was due to other comprehensive loss of
$424 million, distributions to non-controlling interests of $187 million, share repurchases under the NCIB of
$54 million and dividends declared on common and preferred shares of $103 million, partially offset by net
earnings of $161 million.
TransAlta Corporation • 2022 Integrated Report
M29
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Capital
The Company is focused on maintaining a strong balance sheet and financial position to ensure access to
sufficient financial capital. Credit ratings provide information relating to the Company's financing costs,
liquidity and operations, and affect the Company's ability to obtain short-term and long-term financing and/or
the cost of such financing. Maintaining a strong balance sheet also allows the Company to enter into
contracts with a variety of counterparties on terms and prices that are favourable to the Company’s financial
results and provide TransAlta with better access to capital markets through commodity and credit cycles.
In 2022, Moody's reaffirmed the Company's Long Term Rating of Ba1 with a stable outlook. DBRS Morningstar
reaffirmed the Company's issuer rating and Unsecured Debt/Medium-Term Notes rating of BBB (low) and the
Company's Preferred Shares rating of Pfd-3 (low), all with stable outlook. In addition, S&P Global Ratings
reaffirmed the Company's Senior Unsecured Debt rating and Issuer Credit Rating of BB+ with stable outlook.
Risks associated with our credit ratings are discussed in the Governance and Risk Management section of this
MD&A.
TransAlta Corporation • 2022 Integrated Report
M30
Capital Structure
MANAGEMENT'S DISCUSSION AND ANALYSIS
A strong financial position provides the Company with better access to capital markets through commodity
and credit cycles. We use total capital to help evaluate the strength of our financial position. Our capital
structure consists of the following components as shown below:
As at Dec. 31
2022
2020
2021
TransAlta Corporation
Net senior unsecured debt
Recourse debt - CAD debentures
Recourse debt - US senior notes
Credit facilities
Term Facility
Other
Less: cash and cash equivalents(1)
Less: other cash and liquid assets(2)
Net senior unsecured debt
Other debt liabilities
Exchangeable debentures
Non-recourse debt
TAPC Holdings LP bond
OCP Bond
Lease liabilities
Total net debt(3) - TransAlta Corporation
TransAlta Renewables
Net TransAlta Renewables reported debt
Committed credit facility
Pingston bond
Melancthon Wolfe Wind bond
New Richmond Wind bond
Kent Hills Wind bond
Windrise Wind bond
Lease liabilities
Less: cash and cash equivalents(4)
Debt on TransAlta Renewables Economic Investments
US tax equity financing(5)
South Hedland non-recourse debt(5)
Total net debt(3) - TransAlta Renewables
Total consolidated net debt(3)(6)(7)
Non-controlling interests
Exchangeable preferred securities(7)
Equity attributable to shareholders
Common shares
Preferred shares
Contributed surplus, deficit and accumulated other comprehensive
income
Total capital
$
%
$
%
$
%
251
934
—
396
1
(884)
(20)
678
5
18
—
8
—
(17)
—
14
251
888
—
—
4
(703)
(19)
421
339
6
335
94
241
112
1,464
32
45
202
112
206
170
23
(234)
123
711
1,390
2,854
879
400
2,863
942
2
4
2
28
1
1
4
2
4
3
—
(4)
2
14
27
55
17
7
54
18
102
263
78
1,199
—
45
235
120
221
171
22
(244)
135
732
1,437
2,636
1,011
400
2,901
942
4
16
—
—
—
(12)
—
8
6
2
5
1
22
—
1
4
2
4
3
—
(4)
2
13
25
47
18
7
51
17
249
886
114
—
7
(121)
(13)
1,122
330
111
284
112
1,959
—
45
268
127
230
—
22
(582)
134
772
1,016
2,975
1,084
400
2,896
942
3
13
2
—
—
(2)
—
16
5
2
4
2
29
—
1
4
2
3
—
—
(9)
2
11
14
43
16
6
43
14
(2,695)
(51)
(2,261)
(40)
(1,486)
(22)
5,243
100
5,629
100
6,811
100
(1) As at Dec. 31, 2022, cash and cash equivalents is net of bank overdraft.
(2) Includes principal portion of OCP restricted cash as this cash is restricted specifically to repay outstanding debt and also includes the fair
value of economic and designated hedging instruments on debt, as the carrying value of the related debt is impacted by changes in
foreign exchange rates.
(3) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated
in accordance with IFRS.
(4) Includes $145 million (AU$158 million) cash held within TransAlta Energy (Australia) Pty Ltd. reserved for future funding of Australia
growth projects by TransAlta Renewables.
(5) TransAlta Renewables has an economic interest in the US entities holding these debts and an economic interest in the Australian entities,
which includes the AU$786 million (2021 – AU$800 million) senior secured notes.
(6) The tax equity financing for the Skookumchuck wind facility, an equity accounted joint venture, is not represented in these amounts.
(7) The total consolidated net debt excludes the exchangeable preferred securities as they are considered equity with dividend payments
for credit purposes.
TransAlta Corporation • 2022 Integrated Report
M31
MANAGEMENT'S DISCUSSION AND ANALYSIS
We continued to strengthen our financial position during 2022 and have sufficient liquidity to fund our growth
strategy.
We have enhanced liquidity and shareholder value through the following:
2022
•
•
•
Issued US$400 million Senior Green Bonds, with a fixed coupon rate of 7.75 per cent per annum, due
on Nov. 15, 2029;
Repaid the US$400 million 4.50 per cent unsecured senior notes due 2022;
Extended the committed syndicated credit facilities by one year to June 30, 2026 and the committed
bilateral credit facilities by one year to June 30, 2024;
• Closed a two-year floating rate Term Facility with our banking syndicate for $400 million with a
maturity date of Sep. 7, 2024. The Term Facility has interest rates that vary depending on the option
selected (e.g. Canadian prime and bankers' acceptances.); and
•
Purchased and cancelled 4,342,300 common shares at an average price of $12.48 per share through
our NCIB program, for a total cost of $54 million.
2021
• Obtained $173 million in project financing related to our Windrise wind facility.
2020
• Obtained AU$800 million in project financing related to our South Hedland facility;
•
•
•
Received the second tranche of $400 million from Brookfield in consideration for redeemable,
retractable first preferred shares;
Redeemed our outstanding 5 per cent $400 million medium-term notes due on Nov. 25, 2020; and
Purchased and cancelled 7,352,600 common shares at an average price of $8.33 per share through
our NCIB program, for a total cost of $61 million.
Credit Facilities
The Company's credit facilities are summarized in the table below:
As at Dec. 31, 2022
Utilized
Credit facilities
Committed
Facility
size
Outstanding
letters of
credit(1)
Cash
drawings
Available
capacity
Maturity
date
TransAlta Corporation syndicated credit facility
1,250
TransAlta Renewables syndicated credit facility
TransAlta Corporation bilateral credit facilities
TransAlta Corporation Term Facility
Total Committed
Non-Committed
TransAlta Corporation demand facilities
TransAlta Renewables demand facility
Total Non-Committed
700
240
400
2,590
250
150
400
738
—
219
—
957
120
98
218
—
33
—
400
433
—
—
—
512
667
21
—
1,200
130
52
182
Q2 2026
Q2 2026
Q2 2024
Q3 2024
n/a
n/a
(1) TransAlta has obligations to issue letters of credit and cash collateral to secure potential liabilities to certain parties, including those
related to potential environmental obligations, commodity risk management and hedging activities, pension plan obligations, construction
projects and purchase obligations. Letters of credit drawn against the non-committed facilities reduce available capacity under the
committed syndicated credit facilities.
TransAlta Corporation • 2022 Integrated Report
M32
MANAGEMENT'S DISCUSSION AND ANALYSIS
US Tax Equity Financing
The Company owns equity interests in some wind facilities that are eligible for tax incentives available for
renewable energy facilities in the US. With its current portfolio of renewable energy facilities, TransAlta
cannot fully monetize such tax incentives. To take full advantage of these incentives, the Company partners
with Tax Equity Investors (“TEI”) who invest in these facilities in exchange for a share of the tax credits.
Some TEI financing structures include a partial pay-as-you-go ("Pay-go") funding arrangement under which,
when the actual annual electricity production (MWh) exceeds a certain production threshold, the TEI are
obligated to make a cash contribution (“Pay-go contribution”) to the Company. The Pay-go arrangement
results in a lower initial investment by the TEI and provides them with some protection from potential
underperformance of the asset.
TransAlta recognizes the TEI contributions as long-term debt, at an amount representing the proceeds
received from the TEI in exchange for shares of subsidiaries of TransAlta, net of the following elements:
Production tax credit ("PTC")
Allocation of PTCs to the TEI derived from the power generated during the period is
recognized in other revenues as earned and as a reduction in tax equity financing.
Tax shield
Interest expense
Pay-go contributions
Allocation of tax benefits and attributes to the TEI, such as investment tax credits and tax
depreciation, is recognized in net interest expense as claimed and as a reduction in tax
equity financing.
Interest expense using the effective interest rate method is recognized in net interest
expense as incurred and as an increase in tax equity financing.
Additional cash contributions made by the TEI when the annual production exceeds the
contractually determined threshold and is recognized as an increase in tax equity
financing.
Cash distributions
Cash payments to the TEI, recognized as a reduction in tax equity financing.
Production Tax Credit Program
Current US tax law allows qualified wind energy projects to receive tax credits that are earned for each MWh
of generation during the first 10 years of the projects' operation. The TEIs are allocated a portion of the
renewable energy facility's taxable income (losses) and PTCs produced and a portion of the cash generated
by the facility until they achieve an agreed-upon after-tax investment return (“Flip Point”). After the Flip Point,
the TEI will retain a lesser portion of the cash and the taxable income (losses) generated by the facility.
The following table outlines information regarding the Company's tax equity financing arrangements with PTC
eligibility:
Facility
Lakeswind
Big Level and
Antrim
Skookumchuck(1)
Commercial
operation date
Expected Flip
Point
Initial TEI
investment ($)
Expected annual
PTC ($)
Expected annual
Pay-go
Contribution ($)
TEI allocation of
taxable income
and PTCs
(pre-Flip Point)
2014
2019
2020
2029
2030
2029
45
126
121
4
9
10
—
2
—
99 %
99 %
99 %
(1) The Company has a 49 per cent interest in the Skookumchuck wind facility, which is treated as an equity investment under IFRS and our
proportionate share of the net earnings is reflected as equity income on the statement of earnings under IFRS.
TransAlta Corporation • 2022 Integrated Report
M33
MANAGEMENT'S DISCUSSION AND ANALYSIS
Non-Recourse Debt
The Melancthon Wolfe Wind LP, Pingston Power Inc., TAPC Holdings LP, New Richmond Wind LP, Kent Hills
Wind LP, TEC Hedland Pty Ltd, Windrise Wind LP and TransAlta OCP LP non-recourse bonds, with an
aggregate carrying value of $1.8 billion (Dec. 31, 2021 – $1.9 billion), are subject to customary financing
conditions and covenants that may restrict the Company’s ability to access funds generated by the facilities’
operations. Upon meeting certain distribution tests, typically performed once per quarter, the funds are able
to be distributed by the subsidiary entities to their respective parent entity. These conditions include meeting
a debt service coverage ratio prior to distribution, which was met by these entities in the fourth quarter of
2022 with the exception of Kent Hills Wind LP, as discussed below and TAPC Holdings LP, which has been
impacted by higher interest rates in 2022. The funds in these entities that have accumulated since the fourth
quarter test will remain there until the next debt service coverage ratio can be calculated in the first quarter of
2023. At Dec. 31, 2022, $50 million (Dec. 31, 2021 – $67 million) of cash was subject to these financial
restrictions. Additionally, certain non-recourse bonds require that certain reserve accounts be established
and funded through cash held on deposit and/or by providing letters of credit.
Kent Hills Wind Facilities Rehabilitation
During the second quarter of 2022, the Company obtained a waiver and entered into a supplemental
indenture that facilitated the rehabilitation of the Kent Hills 1 and 2 wind facilities. Upon receipt of the waiver,
the Company reclassified a portion of the carrying value outstanding for the KH Bonds to non-current
liabilities with the exception of the scheduled principal repayments due within the next 12 months. In
accordance with the supplemental indenture, Kent Hills Wind LP cannot make any distributions to its partners
until the foundation replacement work has been completed.
Scheduled Debt Maturities
Between 2023 and 2025, we have $839 million of debt maturing, including $400 million of recourse debt
primarily relating to the Term Facility, with the balance mainly related to scheduled non-recourse debt
repayments.
Returns to Providers of Capital
Net Interest Expense
The components of net interest expense are shown below:
Year ended Dec. 31
Interest on debt
Interest on exchangeable debentures
Interest on exchangeable preferred shares
Interest income
Capitalized interest
Interest on lease liabilities
Credit facility fees, bank charges and other interest
Tax shield on tax equity financing(1)
Accretion of provisions
Net interest expense
2022
164
29
28
(24)
(16)
7
27
(2)
49
262
2021
2020
163
29
28
(11)
(14)
7
20
(9)
32
158
29
5
(10)
(8)
8
25
1
30
245
238
(1) The credit balance in 2022 primarily relates to the tax benefit associated with tax depreciation (2021 – investment tax credits) on the
North Carolina Solar facility that was assigned to the tax equity investor. The tax equity investment is treated as debt under IFRS and the
monetization of the tax depreciation and investment tax credits (as applicable) is considered a non-cash reduction of the debt balance
and is reflected as a reduction in interest expense.
Net interest expense was higher in 2022 primarily due to higher accretion of provisions, higher credit facility
fees and other interest due to increased letters of credit issued to support trading and hedging activities, and
higher interest paid on cash collateral held as security for counterparty obligations and lower tax shield on tax
equity financing. This is partially offset by higher interest income due to favourable interest rates and higher
capitalized interest.
TransAlta Corporation • 2022 Integrated Report
M34
MANAGEMENT'S DISCUSSION AND ANALYSIS
Share Capital
The following tables outline the common and preferred shares issued and outstanding:
As at
Feb. 22, 2023
Dec. 31, 2022
Dec. 31, 2021
Number of shares (millions)
Common shares issued and outstanding, end of period
268.2
268.1
271.0
Preferred shares
Series A(1)
Series B(1)
Series C(2)
Series D(2)
Series E
Series G
Preferred shares issued and outstanding in equity, end of period
Series I - Exchangeable Securities(3)
Preferred shares issued and outstanding, end of period
9.6
2.4
10.0
1.0
9.0
6.6
38.6
0.4
39.0
9.6
2.4
10.0
1.0
9.0
6.6
38.6
0.4
39.0
9.6
2.4
11.0
—
9.0
6.6
38.6
0.4
39.0
(1) During the first quarter of 2021, the Company converted 1,417,338 of its 10,200,000 Series A Shares and 871,871 of its 1,800,000 Series
B Shares, on a one-for-one basis, into Series B Shares and Series A Shares, respectively.
(2) During the second quarter of 2022, the Company converted 1,044,299 of its 11,000,000 currently outstanding Series C Shares, on a one-
for-one basis, into Series D Shares.
(3) Brookfield invested $400 million in consideration for redeemable, retractable, first preferred shares. For accounting purposes, these
preferred shares are considered debt and disclosed as such in the consolidated financial statements.
Dividends to Shareholders
The declaration of dividends is at the discretion of the Board. The following are the common and preferred
shares dividends declared in each quarter during 2022:
Declaration date
April 27, 2022
July 27, 2022
Nov. 8, 2022
Dec. 12, 2022
Common shares (Payable date)
July 1, 2022
Oct. 1, 2022
Jan. 1, 2023
April 1, 2023
Common shares
0.0500
0.0500
0.0550
0.0550
Common shares dividends per share
Preferred shares (Payable date)
June 30, 2022
Sept. 30, 2022
Dec. 31, 2022
March 31, 2023
Series A
Series B
Series C
Series D
Series E
Series G
Preferred Series dividends per share
0.17981
0.16505
0.25169
0.25169
0.32463
0.31175
0.17981
0.22099
0.36588
0.28841
0.32463
0.31175
0.17981
0.33700
0.36588
0.40442
0.43088
0.31175
0.17981
0.37991
0.36588
0.45578
0.43088
0.31175
Non-Controlling Interests
As of Dec. 31, 2022, the Company owns 60.1 per cent (2021 – 60.1 per cent) of TransAlta Renewables.
TransAlta Renewables is a publicly traded company whose common shares are listed on the TSX under the
symbol “RNW.” TransAlta Renewables holds a diversified, highly contracted portfolio of assets with
comparatively lower carbon intensity.
We also own 50.01 per cent of TA Cogen (2021 – 50.01 per cent) , which owns, operates or has an interest in
three natural-gas-fired cogeneration facilities (Ottawa, Windsor and Fort Saskatchewan) and one natural-
gas-fired facility (Sheerness). Sheerness operated as a dual-fuel generating facility in 2021.
TransAlta Corporation • 2022 Integrated Report
M35
MANAGEMENT'S DISCUSSION AND ANALYSIS
Since we own a controlling interest in TA Cogen and TransAlta Renewables, we consolidate the entire
earnings, assets and liabilities in relation to those subsidiaries.
The reported net earnings attributable to non-controlling interests for the year ended Dec. 31, 2022,
decreased by $1 million compared to 2021, due to higher TA Cogen net earnings being offset by lower
TransAlta Renewables net earnings. TA Cogen net earnings attributable to non-controlling interests has
increased by $29 million compared to 2021, primarily due to higher merchant pricing in the Alberta market,
partially offset by lower generation due to dispatch optimization.
TransAlta Renewables net earnings attributable to non-controlling interests decreased by $30 million
compared to 2021. The decrease was primarily due to lower finance income related to subsidiaries of
TransAlta, higher asset impairments primarily related to higher discount rates, higher OM&A, lower foreign
exchange gains and higher interest expense from the issuance of the Windrise Green bond in late 2021. In
addition, net earnings decreased due to the extended outage at the Kent Hills 1 and 2 wind facilities. The
decrease was partially offset by higher revenues and the receipt of insurance proceeds for the replacement
costs for the collapsed tower at the Kent Hills site. The Company recognized liquidated damages recoverable
due to turbine availability being below the contractual target at the Windrise wind facility. Finance income
related to subsidiaries of TransAlta was lower as higher distributions were classified as return of capital. Refer
to Note 12 of the consolidated financial statements for further details.
Reported net earnings attributable to non-controlling interests for the year ended Dec. 31, 2021, increased by
$78 million to $112 million compared to 2020. Earnings increased at TransAlta Renewables in 2021 mainly due
to higher finance income from investments in subsidiaries of TransAlta and no fair value losses recognized in
the current year, partially offset by liquidated damages provisions related to unplanned outages at the Sarnia
cogeneration facility, unfavourable steam reconciliation adjustment to Canadian Gas, lower wind production
from the Canadian wind fleet, lower foreign exchange gains and higher asset impairments. Earnings from TA
Cogen were higher in 2021 mainly due to higher prices in the Alberta market.
Other Consolidated Analysis
Unconsolidated Structured Entities or Arrangements
Disclosure is required of all unconsolidated structured entities or arrangements such as transactions,
agreements or contractual arrangements with unconsolidated entities, structured finance entities, special
purpose entities or variable interest entities that are reasonably likely to materially affect liquidity or the
availability of, or requirements for, capital resources. We currently have no such unconsolidated structured
entities or arrangements.
Related Party Transactions
In the normal course of operations, we enter into transactions on market terms with related parties, including
consolidated and equity accounted entities, which have been measured at exchange value and are
recognized in the consolidated financial statements, including, but not limited to: asset management fees,
power purchase and derivative contracts. Refer to Note 36, Related-Party Transactions in the consolidated
financial statements for further details.
Guarantee Contracts
We have obligations to issue letters of credit and cash collateral to secure potential liabilities to certain
parties, including those related to potential environmental obligations, commodity risk management and
hedging activities, pension plan obligations, construction projects and purchase obligations. At Dec. 31, 2022,
we provided letters of credit totalling $1.2 billion (2021 – $902 million) and cash collateral of $304 million
(2021 – $55 million). These letters of credit and cash collateral secure certain amounts included on our
Consolidated Statements of Financial Position under risk management liabilities, defined benefit obligations
and other long-term liabilities and decommissioning and other provisions. The increase in the amount of
letters of credit issued during 2022 relates to the increased collateral required for asset hedging and energy
marketing activity, partially offset by lower letters of credit related to pension plan commitments and the
Highvale mine pension plan and reclamation obligations.
TransAlta Corporation • 2022 Integrated Report
M36
MANAGEMENT'S DISCUSSION AND ANALYSIS
Proceeds from Divestitures
During 2022, the Company closed the sale of two hydro facilities, sold equipment related to its Sundance Unit
5 energy transition assets, and other equipment. As a result of these sales, the Company received proceeds
of $66 million and recorded gains on sale of $32 million. In addition, during the fourth quarter of 2022, the
Company recorded a contract settlement that was recognized in gain on sale of assets and other on the
Consolidated Statements of Earnings (Loss).
Commitments
Contractual commitments are as follows:
Natural gas, transportation and other contracts(1)
Transmission(1)
Coal supply and mining agreements(1)
Long-term service agreements(1)
Operating leases(1,2)
Long-term debt(3)
Exchangeable securities(4)
Principal payments on lease liabilities(5)
2023
2024
2025
2026
2027
2028 and
thereafter
Total
56
10
83
51
3
47
45
45
46
457
696
7
87
49
3
7
71
35
3
3
—
32
2
1
—
21
2
39
67
—
241
140
328
29
42
170
527
142
177
154
2,393 3,563
—
(7)
—
750
4
4
—
3
—
4
—
750
127
135
Interest on long-term debt and lease liabilities(1,6)
205
192
166
158
150
836
1,707
Interest on exchangeable securities(1,4)
Growth(1,7)
TransAlta Energy Transition Bill(1)
52
62
446
6
—
—
—
—
—
—
—
—
—
—
—
—
114
—
446
—
6
Total
1,075
978
1,223
420
378
4,021
8,095
(1) Not recognized as a financial liability on the Consolidated Statements of Financial Position.
(2) Includes leases that have not been recognized as a lease liability and leases that have not yet commenced.
(3) Excludes impact of hedge accounting and derivatives.
(4) Assumes the exchangeable securities will be exchanged by Brookfield on Jan. 1, 2025.
(5) Lease liabilities include a lease incentive of $12 million, expected to be received in 2023.
(6) Interest on long-term debt is based on debt currently in place with no assumption as to refinancing on maturity.
(7) For further details on growth commitments, refer to the Strategy and Capability to Deliver Results section of this MD&A.
Contingencies
TransAlta is occasionally named as a party in various claims and legal and regulatory proceedings that arise
during the normal course of its business. TransAlta reviews each of these claims, including the nature of the
claim, the amount in dispute or claimed and the availability of insurance coverage. There can be no assurance
that any particular claim will be resolved in the Company’s favour or that such claims may not have a material
adverse effect on TransAlta. Inquiries from regulatory bodies may also arise in the normal course of business,
to which the Company responds as required.
The Company conducts internal reviews of its offers and offer behaviour in both the energy and ancillary
services markets in Alberta on an ongoing basis and will self-report suspected contraventions or respond to
inquiries from regulatory agencies as required. There currently is no certainty that any particular matter will be
resolved in the Company’s favour or that such matters may not have a material adverse effect on TransAlta.
Brazeau Facility - Claim against the Government of Alberta
On Sept. 9, 2022, the Company filed a Statement of Claim against the Government of Alberta in the Alberta
Court of King’s Bench seeking a declaration that: (i) granting mineral leases within five kilometres of the
Brazeau facility is a breach of a 1960 agreement between the Company and the Government of Alberta; and
(ii) the Government of Alberta is required to indemnify the Company for any costs or damages that result from
the risks of hydraulic fracturing near the Brazeau facility. On Sept. 29, 2022, the Government of Alberta filed
its Statement of Defence, which asserts, among other things, that the Company: (i) is trying to usurp the
jurisdiction of the Alberta Energy Regulator ("AER"); and (ii) is out of time under the Limitations Act (Alberta).
The trial is scheduled to take place during the first quarter of 2024.
TransAlta Corporation • 2022 Integrated Report
M37
MANAGEMENT'S DISCUSSION AND ANALYSIS
Brazeau Facility - Well Licence Applications to Consider Hydraulic Fracturing Activities
The AER issued a subsurface order on May 27, 2019 that does not permit any hydraulic fracturing within three
kilometres of the Brazeau facility but permits fracking in all formations (except the Duvernay) from three-to-
five kilometres of the Brazeau facility. Subsequently, two oil and gas operators submitted applications to the
AER for approval of 10 well licences (which include hydraulic fracturing activities) within three-to-five
kilometres of the Brazeau facility. The regulatory hearing to consider the applications - Proceeding 379 - is
currently scheduled to be heard between Feb. 27 and March 10, 2023. The Company's position is that
hydraulic fracturing activities within any formation within five kilometres of the Brazeau Facility pose an
unacceptable risk and that the applications should be denied.
Hydro Power Purchase Arrangement - Emission Performance Credits
Balancing Pool is claiming entitlement to the Emission Performance Credits ("EPCs") earned by the Alberta
Hydro facilities as a result of those facilities being opted into the Carbon Competitiveness Incentive
Regulation and Technology Innovation and Emissions Reduction Regulation from 2018 to 2020, inclusive. The
Balancing Pool claims ownership of the EPCs because it believes the change-in-law provisions under the
Hydro Power Purchase Arrangement require the EPCs to be passed through to the Balancing Pool. TransAlta
has not received any benefit from the EPCs nor from any purported change-in-law and believes that the
Balancing Pool has no rights to these credits. An arbitration has commenced and the hearing was scheduled
for Feb. 6 to 10, 2023. However, due to the resignation of one of the panel members, the hearing has been
adjourned. A new panel member has been appointed and a two-week hearing will be held from May 18 to
June 1, 2023. TransAlta holds approximately 1,750,000 EPCs with no recorded book value that were created
between 2018 and 2020, which are at risk as a result of the Balancing Pool's claim.
Sundance A Decommissioning
TransAlta filed an application with the Alberta Utilities Commission ("AUC") seeking payment from the
Balancing Pool for TransAlta’s decommissioning costs for Sundance A, including its proportionate share of the
Highvale mine. The Balancing Pool and Utilities Consumer Advocate are participating as interveners because
they take issue with the decommissioning costs claimed by TransAlta. Due to various factors, including the
COVID-19 pandemic and significant information requests from the Balancing Pool, the application has been
delayed. While a hearing date has not been set, the application will likely be heard in the second half of 2023.
TransAlta expects to receive payment from the Balancing Pool for its decommissioning costs; however, the
amount that the AUC will award is uncertain.
TransAlta Corporation • 2022 Integrated Report
M38
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash Flows
The following highlights significant changes in the Consolidated Statements of Cash Flows for the years
ended Dec. 31, 2022 and Dec. 31, 2021:
Year ended Dec. 31
Cash and cash equivalents, beginning of year
Provided by (used in):
Operating activities
Investing activities
Financing activities
Translation of foreign currency cash
Cash and cash equivalents, end of year
2022
947
877
(741)
45
6
1,134
2021
703
1,001
(472)
(282)
(3)
947
Increase/
(decrease)
244
(124)
(269)
327
9
187
Cash from operating activities for the year ended Dec. 31, 2022, decreased compared with 2021 primarily due
to higher unfavourable changes in working capital, mainly from higher accounts receivable and collateral paid,
partially offset by higher accounts payable and collateral received, and higher fuel and purchased power.
Movements in the collateral accounts relate to high commodity prices and volatility in the markets. This was
partially offset by higher revenues net of unrealized gains and losses from risk management activities, higher
net other operating (income) loss and lower carbon compliance costs.
Cash from investing activities for the year ended Dec. 31, 2022, decreased compared with 2021, largely due
to:
• Higher cash spent on growth projects and Kent Hills remediation construction activities in PP&E
($438 million) and investments during the year ($10 million); and
•
The prior year included proceeds received on the sale of the Pioneer Pipeline ($128 million) partially
offset by:
•
•
Lower net cash spent on acquisitions ($110 million) as the prior year included the North
Carolina Solar acquisition;
Favourable change in non-cash working capital related to the timing of construction
payables for the assets under construction ($71 million);
• Higher realized gains on financial instruments ($33 million);
• Higher proceeds from the sale of property, plant and equipment ($27 million); and
• Higher loan receivable receipts ($21 million).
Cash from financing activities for the year ended Dec. 31, 2022, increased compared with 2021, largely due
to:
• Higher net borrowings under the Company's credit facilities ($563 million);
• Higher proceeds from issuance of long-term debt ($359 million); and
• Higher realized gains on financial instruments ($39 million) partially offset by:
• Higher repayments of long-term debt ($529 million);
• Higher common share repurchases under the NCIB ($48 million);
•
Increased distributions paid to subsidiaries' non-controlling interests ($31 million);
• Higher dividends paid on common shares and preferred shares ($10 million);
• Higher financing fees and other ($9 million); and
•
Lower proceeds on issuances of common shares ($5 million).
TransAlta Corporation • 2022 Integrated Report
M39
MANAGEMENT'S DISCUSSION AND ANALYSIS
Additional IFRS Measures and Non-IFRS Measures
An additional IFRS measure is a line item, heading or subtotal that is relevant to an understanding of the
consolidated financial statements but is not a minimum line item mandated under IFRS, or the presentation of
a financial measure that is relevant to an understanding of the consolidated financial statements but is not
presented elsewhere in the consolidated financial statements. We have included line items entitled gross
margin and operating income (loss) in our Consolidated Statements of Earnings (Loss) for the years ended
Dec. 31, 2022, 2021 and 2020. Presenting these line items provides management and investors with a
measurement of ongoing operating performance that is readily comparable from period to period.
We use a number of financial measures to evaluate our performance and the performance of our business
segments, including measures and ratios that are presented on a non-IFRS basis, as described below. Unless
otherwise indicated, all amounts are in Canadian dollars and have been derived from our consolidated
financial statements prepared in accordance with IFRS. We believe that these non-IFRS amounts, measures
and ratios, read together with our IFRS amounts, provide readers with a better understanding of how
management assesses results.
Non-IFRS amounts, measures and ratios do not have standardized meanings under IFRS. They are unlikely to
be comparable to similar measures presented by other companies and should not be viewed in isolation from,
as an alternative to, or more meaningful than, our IFRS results.
Non-IFRS Financial Measures
Adjusted EBITDA, FFO, FCF, total net debt, total consolidated net debt and adjusted net debt are non-IFRS
measures that are presented in this MD&A. Refer to the Segmented Financial Performance and Operating
Results, Segmented Financial Performance and Operating Results for the Fourth Quarter, Selected Quarterly
Information, Financial Capital and Key Non-IFRS Financial Ratios sections of this MD&A for additional
information, including a reconciliation of such non-IFRS measures to the most comparable IFRS measure.
Adjusted EBITDA
Each business segment assumes responsibility for its operating results measured by adjusted EBITDA.
Adjusted EBITDA is an important metric for management that represents our core business profitability. In the
second quarter of 2022, our adjusted EBITDA composition was adjusted to include the impact of closed
positions that are effectively settled by offsetting positions with the same counterparty to reflect the
performance of the assets and the Energy Marketing segment in the period in which the transactions occur.
Accordingly, the Company has applied this composition to all previously reported periods. Interest, taxes,
depreciation and amortization are not included, as differences in accounting treatments may distort our core
business results. In addition, certain reclassifications and adjustments are made to better assess results,
excluding those items that may not be reflective of ongoing business performance. This presentation may
facilitate the readers' analysis of trends.
The following are descriptions of the adjustments made.
Adjustments to revenue
•
•
•
Certain assets that we own in Canada and in Australia are fully contracted and recorded as finance
leases under IFRS. We believe that it is more appropriate to reflect the payments we receive under
the contracts as a capacity payment in our revenues instead of as finance lease income and a
decrease in finance lease receivables.
Adjusted EBITDA is adjusted to exclude the impact of unrealized mark-to-market gains or losses and
unrealized foreign exchange gains or losses on commodity transactions.
Gains and losses related to closed positions effectively settled by offsetting positions with
exchanges that have been recorded in the period the positions are settled.
TransAlta Corporation • 2022 Integrated Report
M40
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjustments to fuel and purchased power
•
Depreciation on our mining equipment is included in fuel and purchased power.
• Write-downs of coal inventory in 2020 and 2021 are excluded and related to the decision to be off-
coal and the accelerated shutdown of the Highvale mine at the end of 2021 and are not reflective of
ongoing business performance.
•
On the commissioning of the South Hedland facility in July 2017, we prepaid approximately $74
million of electricity transmission and distribution costs. Interest income is recorded on the prepaid
funds. We reclassify this interest income as a reduction in the transmission and distribution costs
expensed each period to reflect the net cost to the business.
Adjustments to operations, maintenance and administration
• Write-down of parts and material inventory related to the Highvale mine and coal operations at our
natural gas converted facilities.
•
Curtailment gains resulting from the shutdown Highvale mine and impacting the defined benefit
pension plan are excluded as they do not reflect on-going performance.
Adjustments to net other operating income (loss)
•
•
•
•
An onerous contract provision for future royalty payments recognized with the shutdown of the
Highvale mine is excluded as these are not part of operating income.
Contract termination penalties as a result of the Company's Clean Energy Transition plan are not
included.
Sheerness facility moving off-coal resulted in the remaining coal supply payments on the existing
coal supply agreement being recognized as an onerous contract in 2020, and is excluded.
Insurance recoveries related to the Kent Hills tower collapse are not included as these relate to
investing activities and are not reflective of ongoing business performance.
Adjustments to earnings (loss) in addition to interest, taxes, depreciation and amortization
•
•
Asset impairment charges (reversals) are not included as these are accounting adjustments that
impact depreciation and amortization and do not reflect ongoing business performance.
Any gains or losses on asset sales or foreign exchange gains or losses are not included as these are
not part of operating income.
Adjustments for equity accounted investments
•
During the fourth quarter of 2020, we acquired a 49 per cent interest in the Skookumchuck wind
facility, which is treated as an equity investment under IFRS and our proportionate share of the net
earnings is reflected as equity income on the statement of earnings under IFRS. As this investment is
part of our regular power-generating operations, we have included our proportionate share of the
adjusted EBITDA of the Skookumchuck wind facility in our total adjusted EBITDA. In addition, in the
Wind and Solar adjusted results, we have included our proportionate share of revenues and expenses
to reflect the full operational results of this investment. We have not included EMG International,
LLC’s adjusted EBITDA in our total adjusted EBITDA as it does not represent our regular power-
generating operations.
Average Annual EBITDA
Average annual EBITDA is a non-IFRS financial measure that is forward-looking, used to show the average
annual EBITDA that the project currently under construction is expected to generate upon completion.
Funds From Operations ("FFO")
FFO is an important metric as it provides a proxy for cash generated from operating activities before changes
in working capital and provides the ability to evaluate cash flow trends in comparison with results from prior
periods. FFO is a non-IFRS measure.
TransAlta Corporation • 2022 Integrated Report
M41
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjustments to cash flow from operations
•
Includes FFO related to the Skookumchuk wind facility, which is treated as an equity accounted
investment under IFRS and equity income, net of distributions from joint ventures is included in cash
flow from operations under IFRS. As this investment is part of our regular power generating
operations, we have included our proportionate share of FFO.
•
Payments received on finance lease receivables are reclassified to reflect cash from operations.
• We adjust for items included in cash from operations related to the decision in 2020 to accelerate
being off-coal and the shutdown of the Highvale mine in 2021, the write-down on parts and material
inventory for our coal operations and voluntary contribution made to fund the Sunhills Mining Ltd.
Pension Plan in 2022 (grouped in the line item under "Clean energy transition provisions and
adjustments").
•
•
•
Cash received/paid on closed positions are reflected in the period that the position is settled.
The Company's share of the Skookumchuck wind equity accounted joint venture is excluded from the
TransAlta deconsolidated results from 2021 onwards due to the sale of an economic interest in the
137 MW Skookumchuck wind facility to TransAlta Renewables.
Other adjustments include payments/receipts for production tax credits, which are reductions to tax
equity debt and include distributions from equity accounted joint venture.
Free Cash Flow ("FCF")
FCF is an important metric as it represents the amount of cash that is available to invest in growth initiatives,
make scheduled principal repayments on debt, repay maturing debt, pay common share dividends or
repurchase common shares. Changes in working capital are excluded so FFO and FCF are not distorted by
changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors
and timing of receipts and payments. FCF is a non-IFRS measure.
Non-IFRS Ratios
FFO per share, FCF per share and adjusted net debt to adjusted EBITDA are non-IFRS ratios that are
presented in the MD&A. Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF and Key
Non-IFRS Financial Ratios sections of this MD&A for additional information.
FFO per Share and FCF per Share
FFO per share and FCF per share are calculated using the weighted average number of common shares
outstanding during the period. FFO per share and FCF per share are non-IFRS ratios.
Supplementary Financial Measures
Financial highlights presented on a proportional basis of TransAlta Renewables, deconsolidated adjusted
EBITDA, deconsolidated FFO and deconsolidated adjusted EBITDA to deconsolidated FFO are supplementary
financial measures that the Company uses to present adjusted EBITDA on a deconsolidated basis. Refer to
the Financial Highlights on a Proportional Basis of TransAlta Renewables and Key Non-IFRS Financial Ratios
sections of this MD&A for additional information.
The Alberta Electricity Portfolio metrics disclosed are also supplementary financial measures used to present
the gross margin by segment for the Alberta market. Refer to the Alberta Electricity Portfolio section of this
MD&A for additional information.
TransAlta Corporation • 2022 Integrated Report
M42
MANAGEMENT'S DISCUSSION AND ANALYSIS
Reconciliation of Non-IFRS Measures on a Consolidated Basis by Segment
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before
income taxes for the three months ended Dec. 31, 2022:
Three months ended, Dec. 31 2022
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
159
98
276
281
44
—
858
(4)
—
854
1
23
238
(7)
12
—
267
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
Realized loss on
closed exchange positions
—
—
7
Decrease in finance lease
receivable
—
—
Finance lease income
—
—
12
4
Unrealized foreign
exchange gain on
commodity
Adjusted revenues
—
—
—
160
121
537
Fuel and purchased power
5
11
196
Reclassifications and adjustments:
—
—
—
—
274
234
Australian interest income
—
—
(1)
—
Adjusted fuel and purchased
power
5
11
195
234
—
40
19
2
—
19
Carbon compliance
—
—
27
155
110
315
22
18
57
—
5
2
—
(5)
(8)
133
92
264
Gross margin
OM&A
Taxes, other than income
taxes
Net other operating (income)
loss
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment charges
Net interest expense
Foreign exchange loss
Gain on sale of assets and
other
Earnings before income taxes
20
—
—
—
—
—
27
12
4
(1)
—
(1)
75
—
—
—
—
75
12
—
—
63
—
1,167
—
446
—
(1)
—
445
—
27
—
695
30
158
9
—
—
(30)
541
(13)
3
—
—
—
—
—
(267)
(27)
(12)
(4)
1
(4)
(309)
—
—
—
—
(4)
(1)
(1)
—
1
1
—
(310)
—
—
—
—
—
—
—
—
854
446
—
446
27
381
157
8
(10)
4
4
(188)
(5)
(67)
(13)
46
7
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M43
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before
income taxes for the three months ended Dec. 31, 2021:
Three months ended, Dec. 31 2021 Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
Reclassifications and adjustments:
84
98
172
238
26
(2) 616
(6)
—
610
—
3
82
(8)
(12)
—
65
(20)
—
(27)
—
—
(6)
—
—
—
—
—
—
(6)
5
—
—
5
—
—
—
—
—
—
11
6
(2) 671
(2) 266
—
—
—
(1)
(11)
(1)
(2) 253
—
39
—
379
29
130
—
—
3
6
29
139
—
—
6
(18)
—
—
9
(9)
(11)
(29) 243
Unrealized mark-to-market
(gain) loss
Realized gain on closed
exchange positions(2)
—
—
(7)
Decrease in finance lease
receivable
Finance lease income
—
—
Adjusted revenues
Fuel and purchased power(3)
Reclassifications and adjustments:
84
3
—
—
11
6
101
264
6
110
Australian interest income
—
—
(1)
Mine depreciation
—
—
—
Coal inventory write-down
—
—
—
Adjusted fuel and purchased
power
3
6
109
Carbon compliance
—
—
14
Gross margin
OM&A(3)
81
13
95
141
17
46
Reclassifications and adjustments:
Parts and materials write-
down
Curtailment gain
Adjusted OM&A
—
—
—
—
—
—
13
17
46
—
—
—
230
149
—
(11)
(1)
137
25
68
20
3
6
29
Taxes, other than income
taxes
1
Net other operating income
—
Reclassifications and adjustments:
2
—
2
(10)
1
(8)
—
—
—
—
—
(10)
67
76
103
9
1
37
Royalty onerous contract
and contract termination
penalties
Adjusted net other operating
(income) loss
Adjusted EBITDA(4)
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment charges
Net interest expense
Foreign exchange loss
Loss on sale of assets and
other
Loss before income taxes
—
—
—
—
(6)
—
—
—
—
—
—
(6)
—
—
—
—
—
—
—
—
(65)
27
(11)
(6)
(55)
—
1
11
1
13
—
(68)
—
(3)
(6)
(9)
—
—
—
—
—
—
610
266
—
—
—
266
39
305
130
—
—
130
6
(18)
(9)
—
(9)
(18)
4
6
(134)
(28)
(59)
(6)
(2)
(32)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) In 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting
positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which
the transactions occur.
(3) In 2021, $6 million was reclassified from OM&A to fuel and purchased power for station service costs in the Hydro segment.
(4) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M44
MANAGEMENT'S DISCUSSION AND ANALYSIS
Reconciliation of Cash Flow from Operations to FFO and FCF
The table below reconciles our cash flow from operating activities to our FFO and FCF for the three months
ended Dec. 31, 2022 and 2021:
Three months ended Dec. 31
Cash flow from operating activities(1)
Change in non-cash operating working capital balances
Cash flow from operations before changes in working capital
Adjustments
Share of adjusted FFO from joint venture(1)
Decrease in finance lease receivable
Clean energy transition provisions and adjustments(2)
Realized (gain) loss on closed exchanged positions
Other(3)
FFO(4)
Deduct:
Sustaining capital(1)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(4)
Weighted average number of common shares outstanding in the period
FFO per share(4)
FCF per share(4)
2022
351
64
415
1
12
7
21
3
459
(67)
(1)
(12)
(61)
(3)
315
269
1.71
1.17
2021
54
148
202
6
11
(6)
(27)
—
186
(55)
(2)
(10)
(38)
(2)
79
271
0.69
0.29
(1) Includes our share of amounts for Skookumchuck wind facility, an equity accounted joint venture.
(2) 2022 includes amounts related to onerous contracts recognized in 2021. 2021 includes a write-down on parts and material inventory and
coal inventory for our coal operations and amounts related to onerous contracts and contract termination penalties.
(3) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from equity accounted joint venture.
(4) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
The table below provides a reconciliation of our adjusted EBITDA to our FFO and FCF for the three months
ended Dec. 31, 2022 and 2021:
Three months ended Dec. 31
Adjusted EBITDA(1)
Provisions
Interest expense
Current income tax (expense) recovery
Realized foreign exchange loss
Decommissioning and restoration costs settled
Other non-cash items
FFO(2)
Deduct:
Sustaining capital(3)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(2)
2022
541
20
(49)
(29)
(18)
(12)
6
459
(67)
(1)
(12)
(61)
(3)
315
2021
243
(18)
(51)
2
(4)
(5)
19
186
(55)
(2)
(10)
(38)
(2)
79
(1) Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to earnings
(loss) before income taxes above.
(2) These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Additional IFRS Measures
and Non-IFRS Measures section of this MD&A and reconciled to cash flow from operating activities above.
(3) Includes our share of amounts for Skookumchuck wind facility, an equity accounted joint venture.
TransAlta Corporation • 2022 Integrated Report
M45
MANAGEMENT'S DISCUSSION AND ANALYSIS
Reconciliation of Non-IFRS Measures on a Consolidated Basis by Segment
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before
income taxes for the year ended Dec. 31, 2022:
Year ended, Dec. 31, 2022
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
606
303
1,209
714
160
(2) 2,990
(14)
—
2,976
Reclassifications and adjustments:
Unrealized mark-to-market
loss
1
104
251
Realized (gain) loss on
closed exchange positions
—
Decrease in finance lease
receivable
—
Finance lease income
—
Unrealized foreign exchange
gain on commodity
—
—
—
—
—
(4)
46
19
—
Adjusted revenues
607
407
1,521
Fuel and purchased power
22
31
641
Reclassifications and adjustments:
10
—
—
—
—
724
566
Australian interest income
—
—
(4)
—
Adjusted fuel and purchased
power
22
31
637
566
Carbon compliance
—
1
83
(1)
Gross margin
OM&A
Taxes, other than income
taxes
585
375
801
55
3
68
195
12
15
Net other operating (income)
loss
—
(23)
(38)
Insurance recovery
—
7
—
Adjusted net other operating
(income) loss
—
(16)
(38)
159
69
4
—
—
—
12
47
—
—
(1)
218
—
—
—
—
218
35
—
—
—
—
—
378
—
—
—
—
43
46
19
(1)
—
—
—
—
—
(378)
(43)
(46)
(19)
1
—
—
—
—
—
(2) 3,475
(14)
(485) 2,976
3
1,263
—
(4)
3
1,259
(5)
78
—
—
—
—
—
1,263
4
4
—
—
1,263
78
—
2,138
(14)
(489)
1,635
101
523
1
35
—
—
—
(61)
7
(54)
(2)
(2)
3
—
3
—
—
—
521
33
(58)
(7)
—
(7)
(58)
527
311
629
86
183
(102) 1,634
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Net interest expense
Foreign exchange gain
Gain on sale of assets and
other
Earnings before income taxes
9
19
(599)
(9)
(262)
4
52
353
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M46
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before
income taxes for the year ended Dec. 31, 2021:
Year ended, Dec. 31, 2021
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
383
323
1,109
709
211
4
2,739
(18)
—
2,721
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
Realized (gain) loss on closed
exchange positions(2)
Decrease in finance lease
receivable
Finance lease income
—
25
(40)
—
—
(6)
—
—
—
41
—
25
Unrealized foreign exchange
gain on commodity
—
—
(3)
Adjusted revenues
383
348
1,126
Fuel and purchased power
16
17
457
Reclassifications and adjustments:
Australian interest income
Mine depreciation
—
—
—
—
(4)
(79)
Coal inventory write-down
—
—
—
Adjusted fuel and purchased
power
16
17
374
Carbon compliance
—
—
118
Gross margin
OM&A
367
331
634
42
59
175
Reclassifications and adjustments:
19
—
—
—
—
728
560
—
(111)
(17)
432
60
236
117
(38)
—
(34)
29
—
—
—
—
—
—
—
23
41
25
(3)
—
—
—
—
—
34
(23)
(41)
(25)
3
—
—
—
—
—
202
4
2,791
(18)
(52)
2,721
—
—
—
—
—
—
4
1,054
—
(4)
—
(190)
—
(17)
4
843
—
178
—
—
—
—
—
—
—
1,054
4
190
17
211
—
—
—
—
1,054
178
202
—
1,770
36
84
513
(18)
(2)
(263)
1,489
—
511
Parts and materials
write-down
Curtailment gain
Adjusted OM&A
Taxes, other than income
taxes
Net other operating loss
(income)
—
(2)
(26)
—
—
—
—
42
59
173
3
10
13
—
—
(40)
6
97
6
48
Reclassifications and adjustments:
Royalty onerous contract and
contract termination penalties —
—
—
(48)
Adjusted net other operating
loss (income)
Adjusted EBITDA(3)
—
—
(40)
322
262 488
—
133
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Net interest expense
Foreign exchange gain
Gain on sale of assets and
other
Loss before income taxes
—
—
36
—
—
—
—
—
—
(28)
6
84
491
1
33
—
8
—
(48)
—
(40)
166
(85) 1,286
—
—
(2)
(1)
—
—
—
28
(6)
22
—
—
48
48
—
—
511
32
8
—
8
9
25
(529)
(648)
(245)
16
54
(380)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) In 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting
positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which
the transactions occur.
(3) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M47
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before
income taxes for the year ended Dec. 31, 2020:
Year ended, Dec. 31, 2020
Hydro
Wind &
Solar(1)
Energy
Transition
Energy
Marketing
Gas
Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
152
332
787
704
122
7
2,104
(3)
—
2,101
Reclassifications and adjustments:
—
2
33
(14)
21
—
42
Unrealized mark-to-market
(gain) loss
Realized gain on closed
exchange positions(2)
Decrease in finance lease
receivable
Finance lease income
Unrealized foreign
exchange loss on
commodity
—
—
—
—
—
—
—
17
7
—
—
4
—
—
—
—
Adjusted revenues
152
334
848
690
Fuel and purchased power
8
25
325
435
Reclassifications and adjustments:
Australian interest income
—
—
(4)
—
Mine depreciation
—
—
(100)
(46)
Coal inventory write-down
—
—
—
(37)
Adjusted fuel and purchased
power
8
25
221
352
Carbon compliance
—
—
120
48
Gross margin
OM&A
144
309
507
290
37
53
166
106
Taxes, other than income
taxes
2
Net other operating income
—
8
—
13
(11)
Reclassifications and adjustments:
Impact of Sheerness going
off-coal
—
—
(28)
Adjusted net other operating
income
—
—
(39)
9
—
—
—
(10)
—
(10)
—
—
—
133
—
—
—
—
—
—
133
30
—
—
—
—
—
—
17
7
—
4
7
2,164
12
805
—
—
—
(4)
(146)
(37)
12
618
(5)
163
—
1,383
80
472
1
—
33
(11)
—
(28)
—
(39)
105
248
367
175
103
(81)
917
Adjusted EBITDA(3)
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment charges
Net interest expense
Foreign exchange gain
Gain on sale of assets and
other
Loss before income taxes
—
—
—
—
—
(3)
—
—
—
—
—
—
(42)
10
(17)
(7)
—
—
—
—
(4)
—
(60)
2,101
—
805
4
146
37
187
—
—
—
—
805
163
(3)
(247)
1,133
—
—
—
—
—
—
—
—
28
28
472
33
(11)
—
(11)
1
7
(654)
(84)
(238)
17
9
(303)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) In 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting
positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which
the transactions occur.
(3) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M48
MANAGEMENT'S DISCUSSION AND ANALYSIS
Reconciliation of Cash Flow from Operations to FFO and FCF
The table below reconciles our cash flow from operating activities to our FFO and FCF:
Year ended Dec. 31
Cash flow from operating activities(1)
Change in non-cash operating working capital balances
Cash flow from operations before changes in working capital
Adjustments
Share of adjusted FFO from joint venture(1)
Decrease in finance lease receivable
Clean energy transition provisions and adjustments(2)(3)
Realized (gain) loss on closed positions with same counterparty
Other(4)
FFO(5)
Deduct:
Sustaining capital(1)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(5)
Weighted average number of common shares outstanding in the year
FFO per share(5)
FCF per share(5)
2022
877
316
1,193
8
46
42
37
20
1,346
(142)
(4)
(43)
(187)
(9)
961
271
4.97
3.55
2021
1,001
(174)
827
13
41
79
23
11
994
(199)
(4)
(39)
(159)
(8)
585
271
3.67
2.16
2020
702
(89)
613
3
17
37
(10)
15
675
(157)
(4)
(39)
(102)
(25)
348
275
2.45
1.27
(1) Includes our share of amounts for Skookumchuck, an equity accounted joint venture.
(2) 2021 includes a write-down on parts and material inventory and coal inventory for our coal operations and amounts related to onerous
contracts and contract termination penalties. 2020 includes a write-down on coal inventory for our coal operations.
(3) During the third quarter of 2022, to support the employees affected by the closure of the Highvale mine and our transition off coal to
cleaner sources, the Company made a voluntary special contribution of $35 million to the Highvale mine pension plan. 2022 also includes
amounts related to onerous contracts recognized in 2021.
(4) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from equity accounted joint venture.
(5) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
M49
MANAGEMENT'S DISCUSSION AND ANALYSIS
The table below bridges our adjusted EBITDA to our FFO and FCF:
Year ended Dec. 31
Adjusted EBITDA(1)
Provisions
Interest expense
Current income tax expense
Realized foreign exchange gain (loss)
Decommissioning and restoration costs settled
Other cash and non-cash items
FFO(2)
Deduct:
Sustaining capital(3)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(2)
2022
1,634
25
(200)
(65)
—
(35)
(13)
1,346
(142)
(4)
(43)
(187)
(9)
961
2021
1,286
(43)
(200)
(56)
(2)
(18)
27
994
(199)
(4)
(39)
(159)
(8)
585
2020
917
7
(192)
(35)
8
(18)
(12)
675
(157)
(4)
(39)
(102)
(25)
348
(1) Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to earnings
(loss) before income taxes above.
(2) These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Additional IFRS Measures
and Non-IFRS Measures section of this MD&A and reconciled to cash flow from operating activities above.
(3) Includes our share of amounts for Skookumchuck wind facility, an equity accounted joint venture.
For explanations for the current period, refer to the Highlights section of this MD&A.
FCF increased by $376 million in 2022, compared to 2021, driven primarily by higher adjusted EBITDA and a
decrease in sustaining capital spending due to lower planned maintenance, partially offset by higher
distributions paid to subsidiaries' non-controlling interests.
TransAlta Corporation • 2022 Integrated Report
M50
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Highlights on a Proportional Basis of TransAlta Renewables
The proportionate financial information below reflects TransAlta's share of TransAlta Renewables relative to
TransAlta's total consolidated figures. The financial highlights presented on a proportional basis of TransAlta
Renewables are supplementary financial measures to reflect TransAlta Renewables' portion of the
consolidated figures.
Consolidated Results for the Year Ended Dec. 31
The following table reflects the generation and summary financial information on a consolidated basis for the
year ended Dec. 31:
Year ended, Dec. 31
TransAlta Renewables
Hydro
Wind and Solar(3)
Gas(3)
Corporate
TransAlta Renewables before
adjustments
Less: Proportion of TransAlta
Renewables not owned by
TransAlta Corporation
Portion of TransAlta Renewables
owned by TransAlta Corporation
Add: TransAlta Corporation's
owned assets excluding TransAlta
Renewables
Hydro
Wind and Solar
Gas
Energy Transition
Energy Marketing
Corporate
Actual generation (GWh)
Adjusted EBITDA(1)
Earnings (loss) before income
taxes(2)
2022
2021
2020
2022
2021
2020
2022
2021
2020
410
434
429
4,248
3,898
4,042
3,308
3,236
2,919
13
273
223
17
248
217
21
256
205
—
—
—
(22)
(19)
(20)
7,966
7,568
7,390
487
463
462
57
133
188
(3,178)
(3,020)
(2,938)
(194)
(185)
(182)
(23)
(53)
(74)
4,788
4,548
4,452
293
278
280
34
80
114
1,578
1,502
1,703
—
—
27
8,140
3,574
7,329
7,861
5,706
7,999
—
—
—
—
—
—
514
38
406
86
183
305
14
271
133
166
84
(8)
162
175
103
(80)
(66)
(61)
TransAlta Corporation with
proportionate share of TransAlta
Renewables
18,080
19,085 22,042
1,440
1,101
Non-controlling interests
3,178
3,020
2,938
194
185
TransAlta consolidated
21,258
22,105 24,980
1,634
1,286
735
182
917
330
23
353
(433)
(377)
53
74
(380)
(303)
(1) Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to earnings
(loss) before income taxes above.
(2) TransAlta Renewables amounts are comprised of its reported earnings before income taxes plus the reported earnings before income
taxes of the assets in which it holds an economic interest less finance income related to subsidiaries of TransAlta.
(3) Wind and Solar and Gas segments include those assets in which TransAlta Renewables holds an economic interest.
TransAlta Corporation • 2022 Integrated Report
M51
MANAGEMENT'S DISCUSSION AND ANALYSIS
Key Non-IFRS Financial Ratios
The methodologies and ratios used by rating agencies to assess our credit rating are not publicly disclosed.
We have developed our own definitions of ratios and targets to help evaluate the strength of our financial
position. These metrics and ratios are not defined and have no standardized meaning under IFRS and may not
be comparable to those used by other entities or by rating agencies. We maintained a strong and flexible
financial position in 2022.
Adjusted Net Debt to Adjusted EBITDA
As at Dec. 31
Period-end long-term debt(1)
Exchangeable securities
Less: Cash and cash equivalents(2)
Add: 50 per cent of issued preferred shares and exchangeable preferred
shares(3)
Other(4)
Adjusted net debt(5)
Adjusted EBITDA(6)
Adjusted net debt to adjusted EBITDA(times)
2022
3,653
339
(1,118)
671
(20)
3,525
1,634
2.2
2021
3,267
335
(947)
671
(19)
2020
3,361
330
(703)
671
(13)
3,307
3,646
1,286
2.6
917
4.0
(1) Consists of current and long-term portion of debt, which includes lease liabilities and tax equity financing.
(2) Cash and cash equivalents, net of bank overdraft.
(3) Exchangeable preferred shares are considered equity with dividend payments for credit-rating purposes. For accounting purposes, they
are accounted for as debt with interest expense in the consolidated financial statements. For purposes of this ratio, we consider 50 per
cent of issued preferred shares, including these, as debt.
(4) Includes principal portion of TransAlta OCP restricted cash ($17 million for both 2022 and 2021, $10 million for 2020) and fair value of
hedging instruments on debt (included in risk management assets and/or liabilities on the Consolidated Statements of Financial Position).
(5) The tax equity financing for the Skookumchuck wind facility, an equity accounted joint venture, is not represented in this amount.
Adjusted net debt is not defined and has no standardized meaning under IFRS. Presenting this item from period to period provides
management and investors with the ability to evaluate earnings trends more readily in comparison with prior periods’ results. Refer to the
Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
(6) Last 12 months.
The Company's capital is managed internally and evaluated by management using a net debt position. We use
the adjusted net debt to adjusted EBITDA ratio as a measurement of financial leverage and to assess our
ability to service debt. Our target for adjusted net debt to adjusted EBITDA is 3.0 to 3.5 times. Our adjusted
net debt to adjusted EBITDA ratio for 2022 was better than the low end of our target and improved compared
to 2021, as strong adjusted EBITDA more than offset the impact of higher adjusted net debt.
TransAlta Corporation • 2022 Integrated Report
M52
MANAGEMENT'S DISCUSSION AND ANALYSIS
Deconsolidated Adjusted EBITDA by Segment
We invest in our assets directly as well as with joint venture partners. Deconsolidated financial information is
a supplementary financial measure and is not intended to be presented in accordance with IFRS.
Adjusted EBITDA is a key metric for TransAlta and TransAlta Renewables and provides management and
shareholders a representation of core business profitability. Deconsolidated adjusted EBITDA is used in key
planning and credit metrics, and segment results highlight the operating performance of assets held directly
at TransAlta that are comparable from period to period.
A reconciliation of adjusted EBITDA to deconsolidated adjusted EBITDA by segment results is set out below:
Year ended Dec. 31
2022
2021
2020
TransAlta
Consolidated
TransAlta
Renewables
TransAlta
Deconsolidated
TransAlta
Consolidated
TransAlta
Renewables
TransAlta
Deconsolidated
TransAlta
Consolidated
TransAlta
Renewables
TransAlta
Deconsolidated
Hydro
Wind and Solar
Gas
Energy
Transition
Energy
Marketing
Corporate
Adjusted
EBITDA
Less: TA Cogen
adjusted
EBITDA
Less: EBITDA
from joint
venture
investments(1)
Add: Dividend
from TransAlta
Renewables
Add: Dividend
from TA Cogen
Deconsolidated
TransAlta
adjusted
EBITDA
527
311
629
86
183
13
273
223
—
—
322
262
488
133
166
17
248
217
—
—
105
248
367
175
103
21
256
205
—
—
(102)
(22)
(85)
(19)
(81)
(20)
1,634
487
1,147
1,286
463
823
917
462
455
(197)
(133)
—
151
52
1,153
—
151
34
875
(54)
(3)
151
17
566
(1) As of the second quarter of 2021, our share of amounts for the Skookumchuck wind equity accounted joint venture is excluded from the
TransAlta deconsolidated results due to the sale of an economic interest in the 137 MW Skookumchuck wind facility to TransAlta
Renewables.
TransAlta Corporation • 2022 Integrated Report
M53
MANAGEMENT'S DISCUSSION AND ANALYSIS
Deconsolidated FFO
The Company has set capital allocation targets based on deconsolidated FFO available to shareholders.
Deconsolidated financial information is a supplementary financial measure and is not defined, has no
standardized meaning under IFRS and may not be comparable to those used by other entities or by rating
agencies. See also the Additional IFRS Measures and Non-IFRS Measures section of this MD&A for further
details. Deconsolidated FFO for the years ended Dec. 31 is detailed below:
Year ended Dec. 31
2022
2021
2020
TransAlta
Consolidated
TransAlta
Renewables
TransAlta
Deconsolidated
TransAlta
Consolidated
TransAlta
Renewables
TransAlta
Deconsolidated
TransAlta
Consolidated
TransAlta
Renewables
TransAlta
Deconsolidated
Cash flow from
operating
activities
Change in non-
cash operating
working capital
balances
Cash flow from
operations
before changes
in working
capital
Adjustments:
Decrease in
finance lease
receivable
Clean energy
transition
provisions and
adjustments(1)
Share of FFO
from joint
venture
Realized (gain)
loss on closed
exchange
positions
Finance income -
economic
interests
FFO - economic
interests(2)
Other(3)
FFO
Dividend from
TransAlta
Renewables
Distributions to
TA Cogen's
Partner
Less: Share of
adjusted FFO
from joint
venture(4)
Deconsolidated
TransAlta FFO
877
257
1,001
336
702
267
316
(5)
(174)
(13)
(89)
31
1,193
252
827
323
613
298
46
—
41
—
17
—
42
8
37
—
—
20
1,346
—
—
—
(40)
182
—
394
79
13
—
—
37
3
—
—
23
—
(10)
—
—
—
11
952
994
(108)
191
—
406
—
—
15
588
675
(69)
180
—
409
151
(87)
—
1,016
151
(56)
—
683
266
151
(17)
(3)
397
(1) During the third quarter of 2022, to support the employees affected by the closure of the Highvale mine and our transition off coal to
cleaner sources, the Company made a voluntary special contribution of $35 million to the Highvale mine pension plan. 2022 also includes
amounts related to onerous contracts recognized in 2021. 2021 includes a write-down on parts and material inventory and coal inventory
for our coal operations and amounts related to onerous contracts and contract termination penalties. 2020 includes a write-down on coal
inventory for our coal operations.
(2) FFO - economic interests calculated as FCF economic interests plus sustaining capital expenditures economic interests and tax equity
distributions, and plus/minus currency adjustment.
(3) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from equity accounted joint venture.
(4) As of the second quarter of 2021, our share of amounts for the Skookumchuck wind equity accounted joint venture is excluded from the
TransAlta deconsolidated results due to the sale of an economic interest in the 137 MW Skookumchuck wind facility to TransAlta
Renewables.
TransAlta Corporation • 2022 Integrated Report
M54
MANAGEMENT'S DISCUSSION AND ANALYSIS
Deconsolidated Net Debt to Deconsolidated Adjusted EBITDA
In addition to reviewing fully consolidated ratios and results, management reviews net debt to adjusted
EBITDA on a deconsolidated basis to highlight TransAlta's financial flexibility, balance sheet strength and
leverage. Deconsolidated financial information is a supplementary financial measure and is not defined under
IFRS, and may not be comparable to measures used by other entities or by rating agencies. Also, refer to the
Additional IFRS Measures and Non-IFRS Measures section of this MD&A for further details.
As at Dec. 31
Adjusted net debt(1)
Add: TransAlta Renewables cash and cash equivalents(2)
Less: TransAlta Renewables long-term debt
Less: US tax equity financing and South Hedland debt(3)
Deconsolidated net debt
Deconsolidated adjusted EBITDA(4)(5)
Deconsolidated net debt to deconsolidated adjusted EBITDA(6) (times)
2022
3,525
234
(790)
(834)
2,135
1,153
1.9
2021
3,307
244
(814)
(867)
2020
3,646
582
(692)
(906)
1,870
2,630
875
2.1
566
4.6
(1) Adjusted net debt is a Non-IFRS measure. Refer to the Adjusted Net Debt to Adjusted EBITDA calculation under the Key Financial Non-
IFRS Financial Ratios section of this MD&A for the reconciliation and composition of adjusted net debt.
(2) In 2022, includes cash held within TransAlta Energy (Australia) Pty Ltd. reserved for future funding of Australian growth projects by
TransAlta Renewables.
(3) Relates to assets where TransAlta Renewables has economic interests.
(4) Refer to the Deconsolidated Adjusted EBITDA by Segment section of this MD&A for the reconciliation and composition of deconsolidated
adjusted EBITDA and the Additional IFRS Measures and Non-IFRS Measures section of this MD&A for the composition of adjusted
EBITDA.
(5) Last 12 months.
(6) The non-IFRS ratio is not a standardized financial measure under IFRS and might not be comparable to similar financial measures
disclosed by other issuers.
Our target for deconsolidated net debt to deconsolidated adjusted EBITDA is 2.5 to 3.0 times. Our
deconsolidated net debt to deconsolidated adjusted EBITDA ratio for 2022 improved compared with 2021, as
higher deconsolidated adjusted EBITDA more than offset the increase in deconsolidated net debt. Higher
deconsolidated net debt is a result of higher corporate debt, partially offset by an increase in cash balances.
2023 Outlook
Our annual outlook highlights continuing strong cash flow expectations for 2023. Our fleet remains well
positioned to capture the ongoing strength that we see in the Alberta merchant market. The Company is
focused on redeploying these cash flows towards growing our contracted renewables asset base. On Nov. 7,
2022, the Board of Directors approved an increase to the annualized dividend to $0.22 per share, beginning
with the Jan. 1, 2023 dividend.
The following table outlines our expectations on key financial targets and related assumptions for 2023 and
should be read in conjunction with the narrative discussion that follows and the Governance and Risk
Management section of this MD&A:
Measure
2023 Target
2022 Updated target
2022 Actuals
Adjusted EBITDA(1)(2) $1,200 million-$1,320 million
$1,380 million-$1,460 million
$1,634 million
FCF(1)(2)
Dividend
$560 million-$660 million
$725 million-$775 million
$961 million
$0.22 per share annualized
$0.20 per share annualized
$0.20 per share annualized
(1) These items are not defined and have no standardized meaning under IFRS. Refer to the Reconciliation of Non-IFRS Measures section of
this MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with
IFRS. See also the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
(2) During the third quarter of 2022, the Company revised and increased our 2022 guidance for adjusted EBITDA and FCF based on the
strong financial performance attained to date and our expectations for the balance of year.
TransAlta Corporation • 2022 Integrated Report
M55
MANAGEMENT'S DISCUSSION AND ANALYSIS
Range of key 2023 power and gas price assumptions
Market
Alberta Spot ($/MWh)
Mid-C Spot (US$/MWh)
AECO Gas Price ($/GJ)
2023 Assumption
$105 to $135
US$75 to US$85
$4.60
Alberta spot price sensitivity: a +/- $1/MWh change in spot price is expected to have a +/- $4 million impact
on adjusted EBITDA for 2023.
Other assumptions relevant to the 2023 outlook
Sustaining capital
Energy Marketing gross margin
Alberta Hedging
Range of hedging assumptions
Hedged production (GWh)
Hedge price ($/MWh)
Hedged gas volumes (GJ)
Hedge gas prices ($/GJ)
$140 million - $170 million
$90 million - $110 million
2023(1)
6,874
$98
64 million
$2.54
(1) In the fourth quarter of 2022, the Company revised the range of hedging assumptions for 2023 based on current hedge levels.
Adjusted EBITDA is estimated to be between $1.2 billion and $1.3 billion. The midpoint of the range
represents an 11 per cent decrease from the midpoint of the 2022 outlook. FCF is expected to be between
$560 million and $660 million and excludes the impact of the rehabilitation capital expenditures required at
Kent Hills 1 and 2 wind facilities. The midpoint of the range represents a 19 per cent decrease from the
midpoint of the 2022 outlook. These changes to adjusted EBITDA and FCF are largely driven by lower
expected pricing levels in Alberta based on our fundamental forecast and adjusted performance expectations
from the Energy Marketing segment, partially offset by contributions from newly commissioned projects that
will include the Garden Plain wind project, White Rock wind projects, Horizon Hill wind projects, Northern
Goldfields solar project, Mount Keith 132kV transmission expansion and completion of the Kent Hills 1 and 2
rehabilitation and the full return of the wind facilities to service in the second half of 2023.
The Company's outlook for 2023 may be impacted by a number of factors as detailed further below.
TransAlta Corporation • 2022 Integrated Report
M56
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operations
The following provides an update to our assumptions included in the 2023 Outlook.
Market Pricing
The following graphs include 2023 pricing based on a range of assumptions and is subject to change:
For 2023, we see strong merchant pricing levels continuing in Alberta and the Pacific Northwest, although at
lowered target ranges for both regions. Lower year-over-year pricing in Alberta is expected to be driven by
normalized weather expectations and the expected additions of new gas, wind and solar supply, including
TransAlta’s new Garden Plain wind facility, which is expected to achieve commercial operation in the first half
of 2023. Lower year-over-year pricing in the Pacific Northwest will be impacted by weaker natural gas prices
and will also depend on the actual hydrology for the region during the year. Ontario power prices for 2023 are
expected to be lower than 2022 due to lower natural gas prices despite ongoing nuclear refurbishment
outages.
The objective of our portfolio management strategy in Alberta is to balance opportunity and risk and to deliver
optimization strategies that contribute to our total investment, which includes a return of and on invested
capital. We can be more or less hedged in a given period and we expect to realize our annual targets through
a combination of forward hedging and selling generation into the spot market. The assets within the Alberta
Electricity Portfolio are managed as a portfolio to maximize the overall value of generation and capacity from
our hydro, wind and energy storage and thermal facilities. Financial hedging is a key component of cash flow
certainty and the hedges are tied to the portfolio of assets rather than a single facility.
Kent Hills Wind Facilities Outage
It is expected that the rehabilitation of the Kent Hills 1 and 2 wind facilities will be completed and they will
fully return to service in the second half of 2023.
Fuel and Compliance Costs
For the Alberta Gas fleet, gas consumption is expected to decrease from lower generation. This will drive
lower GHG emissions, and the combined effect will result in lower total fuel and GHG costs for a given volume
of power production. This will be partially offset by an increased carbon tax in Alberta.
In the Pacific Northwest of the US, the coal mine adjacent to our Centralia thermal facility is in the reclamation
stage. Fuel at Centralia has been purchased from external suppliers in the Powder River Basin and delivered
by rail. The delivered fuel cost in 2023 is expected to be higher than 2022 due to higher expected generation.
Most of the generation from gas turbine-based power facilities is sold under contracts with pass-through
provisions for fuel. For gas generation with no pass-through provisions, we purchase natural gas from outside
companies in line with production, thereby minimizing our risk to changes in prices.
We closely monitor the risks associated with changes in electricity and input fuel prices on our future
operations and, where we consider it appropriate, use various physical and financial instruments to hedge our
assets and operations from such price risks.
TransAlta Corporation • 2022 Integrated Report
M57
Annual Average Spot Electricity Prices$162$82$120$8020222023 (Assumption)AB System Market Price (Cdn$/MWh)Mid-Columbia Price (US$/MWh)$—$100$200Annual Average Gas (AECO) Prices$5.08$4.6020222023 (Assumption)Natural gas price (AECO) per GJ$—$5.00$10.00 MANAGEMENT'S DISCUSSION AND ANALYSIS
Energy Marketing
Adjusted EBITDA from our Energy Marketing segment is affected by prices and volatility in the market, overall
strategies adopted and changes in regulation and legislation. Our outlook has been adjusted to reflect the
exceptional performance achieved in 2021 and 2022. We continuously monitor both the market and our
exposure to maximize earnings while still maintaining an acceptable risk profile. Our 2023 objective for the
Energy Marketing segment is to contribute between $90 million and $110 million in realized gross margin for
the year, which is consistent with normalized performance expectations.
Exposure to Fluctuations in Foreign Currencies
Our strategy is to minimize the impact of fluctuations in the Canadian dollar against the US dollar and
Australian dollar by offsetting foreign-denominated assets with foreign-denominated liabilities and by
entering into foreign exchange contracts. We also have foreign-denominated expenses, including principal
and interest charges, which largely offset our net foreign-denominated revenues.
Decommissioning and Restoration Costs
Decommissioning and restoration costs are expected to be higher in 2023, largely driven by increases in
restoration costs associated with the retired Alberta assets within the Energy Transition segment.
Sustaining Capital Expenditures
The Company expects sustaining capital to be in the range of $140 million to $170 million. The midpoint for
the range represents a 3 per cent decrease from the midpoint of the 2022 outlook sustaining capital range of
$150 million to $170 million. This is driven by lower sustaining capital expenditures for planned major
maintenance related to the Centralia Unit 2 and the Sheerness facility offset by higher capital expenditure
across our Hydro fleet.
The Kent Hills foundation rehabilitation capital expenditure has been segregated from our sustaining capital
range due to the extraordinary and rare nature of this expenditure. Refer to the Wind and Solar section of this
MD&A for more details.
Our estimate for total sustaining capital is as follows:
Total sustaining capital
Spent in
2022
Spent in
2021
Expected spend in
2023
142
199
140-170
Liquidity and Capital Resources
We expect to maintain adequate available liquidity under our committed credit facilities, including the Term
Facility (as defined above), which the Company entered into during the third quarter of 2022. We currently
have access to $2.1 billion in liquidity, including $1.1 billion in cash. On Nov. 17, 2022, the Company issued
US$400 million Senior Green Bonds, which have a coupon rate of 7.75 per cent per annum and mature on
Nov. 15, 2029. Including the effects of settled interest rate swaps, the notes have an effective yield of
approximately 5.98 per cent. The funds required for committed growth, sustaining capital and productivity
projects are not expected to be significantly impacted by the current economic environment. Refer to the
Significant and Subsequent Events and Financial Capital sections of this MD&A for further details.
Net Interest Expense
Interest expense for 2023 is expected to be slightly higher than in 2022, largely due to higher levels of debt,
partially offset by higher capitalized interest on growth project expenditures. In addition, changes in interest
rates on variable debt and in the value of the Canadian dollar relative to the US and Australian dollars can
affect the amount of interest expense incurred.
TransAlta Corporation • 2022 Integrated Report
M58
MANAGEMENT'S DISCUSSION AND ANALYSIS
Strategy and Capability to Deliver Results
Our goal is to be a leading customer-centred electricity company, committed to a sustainable future, focused
on increasing shareholder value by growing our portfolio of high-quality generation facilities with stable and
predictable cash flows. Our strategy includes meeting our customers' needs for clean, safe, low-cost, reliable
electricity and providing operational excellence and continuous improvement in everything we do.
The Company's enhanced focus on renewable generation and storage solutions for customers is driven
largely by global decarbonization policies and the increase in demand and growth projections in the
renewable sector, namely for companies to achieve their ESG ambitions. For additional information on
regulatory developments, refer to the ESG section of this MD&A.
On Sept. 28, 2021, TransAlta announced its strategic growth targets and a five-year Clean Electricity Growth
Plan. Our Clean Electricity Growth Plan established the following strategic priorities and targets to guide our
path from 2021 to 2025. These include:
• Deliver 2 GW of incremental renewable capacity with a targeted capital investment of $3.6 billion1 by
the end of 2025. These new assets, once fully operational, are targeted to deliver incremental
average annual EBITDA2 of $315 million1;
Accelerate growth into customer-centred renewables and storage through the deployment of our 3
GW development pipeline;
•
•
•
•
Expand the Company's development pipeline to 5 GW by 2025 to enable a two-fold increase in its
renewables fleet between 2025 and 2030;
Realize targeted diversification and value creation by focusing on expanding our platform in each of
our core geographies (Canada, the US and Australia);
Lead in ESG policy development to enable the successful evolution of the markets in which we
operate and compete; and
• Define the next generation of power solutions and technologies and potential for parallel investments
in new complementary sectors by the end of 2025.
Our 2023 priorities for the Clean Electricity Growth Plan include:
•
•
Reaching final investment decision on 500 MW of additional clean energy projects across Canada,
the US and Australia; and
Adding at least 1,500 MW of new development sites to our pipeline.
We expect the Company's adjusted EBITDA generated from renewable sources, including hydro, wind and
solar technologies, to increase to 70 per cent by the end of 2025. The Clean Electricity Growth Plan will
largely be funded from current cash balances, cash generated from operations and asset-level financing.
As of Feb. 22, 2023, we have made significant progress in achieving the targets of the Clean Electricity
Growth Plan.
1
2
The targeted capital investment of $3 billion and average annual EBITDA of $250 million, as previously disclosed in 2021, were revised
upwards for the current inflationary environment.
Average annual EBITDA is not defined and has no standardized meaning under IFRS, and is forward-looking. Refer to the Additional IFRS
Measures and Non-IFRS Measures section of this MD&A for further discussion.
TransAlta Corporation • 2022 Integrated Report
M59
2 GW Renewable Energy Capacity Target40%$3.6B Capital Investment Target41%$315M Incremental Average Annual EBITDA Target47%
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our progress towards achieving our strategic targets is summarized below:
Strategic Targets
Goals
Target
Results
Comments
Accelerate
Growth in
Customer-
centered
Renewables and
Storage
Deliver 2 GW of renewable
capacity with an estimated
capital investment of $3.6
billion1 by the end of 2025.
On track
In 2022, the Company delivered two new projects. The 200
MW Horizon Hill wind project and the Mount Keith 132kV
transmission expansion in Australia.
Construction on these new projects commenced in 2022
and they are both planned for completion in the second half
of 2023.
As of the end of 2022, we have successfully delivered
800MW of new growth, 40% of our 2 GW target.
Deliver incremental average
annual EBITDA of $315
million.1
On track
The Horizon Hill wind project will add incremental EBITDA in
the range of US$30-US$33 million and the Mount Keith
132kV transmission expansion will add incremental EBITDA
in the range of AU$6-AU$7 million.
Expand the Company's
development pipeline to 5
GW by 2025 to enable a two-
fold increase in its
renewables fleet between
2025 and 2030.
Grow our asset base in our
core geographies of Canada,
Australia and the US to
realize diversification and
value creation.
On track
On track
Take a Targeted
Approach to
Diversification
Our cumulative progress towards our incremental EBITDA
target is approximately $149 million.
The Company continues to evaluate opportunities to add
new development sites to our pipeline. These include
acquisitions of individual early-stage development sites,
small development portfolios and prospecting of new sites.
For 2022, we have grown our development pipeline by
approximately 1,980 MW in the US, Canada and Australia.
The Company has successfully added new contracted
renewable assets in each of its three core geographies. We
have diversified within the US market through our North
Carolina Solar facility acquisition In 2021 and the new
Oklahoma investments, which added three new investment-
grade customers in 2022.
On track
The Company had liquidity of $2.1 billion as at Dec. 31,
2022.
Maintain Our
Financial
Strength and
Capital Allocation
Discipline
Deliver strong cash flow from
our existing portfolio to
allocate towards our funding
priorities including growth,
dividends and share
buybacks.
Define the Next
Generation of
Energy Solutions
and Technologies
On track
Meet the needs of our
customers and communities
through the implementation
of innovative energy
solutions and parallel
investments in new
complementary sectors by
the end of 2025.
Lead in ESG
Policy
Development
On track
Actively participate in policy
development to ensure the
electricity that we provide
contributes to emissions
reduction, grid reliability and
competitive energy prices to
enable the successful
evolution of the markets in
which we operate and
compete.
The Company returned $54 million to shareholders through
share buybacks in 2022 under our NCIB.
The Company increased the annual common share dividend
by 10 per cent to $0.22 per year effective Jan. 1, 2023.
The Company established an Energy Innovation team to
progress our goals in this area. The team has recently
completed an equity investment in Ekona Power Inc., an
early-stage hydrogen production company, in order to
pursue commercialization of low cost, net-zero aligned
hydrogen. The Company also committed to invest US$25
million over the next four years in the Energy Impact
Partners Frontier Fund, which provides a portfolio approach
to investing in emerging technologies focused on net-zero
emissions. In 2022, the Company invested $10 million
(US$8 million).
The Company is actively engaging the Government of
Canada and Government of Alberta regarding the proposed
federal Clean Electricity Regulations. Throughout the
engagement, TransAlta continues to provide input regarding
how to achieve emissions reductions while maintaining
necessary reliability and affordability.
The Company worked with the Government of Canada as
the government designed new investment tax credits for
clean technologies.
Successfully
Navigate through
the COVID-19
Pandemic
Continue to maintain an
effective response to
COVID-19 and plan a safe
return to our offices.
Achieved Our staff have returned to our offices and sites, and we
continue to monitor local public health authority and
government guidelines in all jurisdictions in which we
operate to ensure the ongoing health and safety of all
employees and contractors.
(1) The targeted capital investment of $3 billion and average annual EBITDA of $250 million, as previously disclosed in 2021, were revised
upwards for the current inflationary environment.
TransAlta Corporation • 2022 Integrated Report
M60
MANAGEMENT'S DISCUSSION AND ANALYSIS
Growth
The Company announced two new projects in 2022: the 200 MW Horizon Hill wind project and the Mount
Keith 132kV expansion project. We have established, and are continuing to expand, our pipeline of potential
growth projects. Our pipeline includes 374 MW of advanced-stage development projects along with 3,891
MW to 4,991 MW of projects in earlier stages of development.
We are primarily evaluating greenfield opportunities in Alberta, Western Australia and the US along with
acquisitions in markets in which we have existing operations.
Projects under Construction
The following projects have been approved by the Board of Directors, have executed PPAs and are currently
under construction. The projects under construction will be financed through existing liquidity in the near
term. We will continue to explore project financing or tax equity as a long-term financing solution on an asset-
by-asset basis.
Total project (millions)
Type
Region MW
Estimated
spend
Spent to
date
Target
completion
date(1)
PPA
Term
(2)
Average
annual
EBITDA(3) Status
Wind
AB
130 $
190 — $200
$
171 H1 2023
17
$14-$15 •
•
•
Fully contracted
All major equipment
deliveries are complete
Turbine erection and
commissioning is now
underway
• Grid interconnection
completed
Wind
OK
300 US$ 470 — US$490 US$273 H2 2023
—
US$48-
US$52
•
Long-term PPAs
executed
Project
Canada
Garden
Plain(4)
United States
White
Rock(5)
Wind
OK
200 US$ 300 — US$315 US$141 H2 2023
—
Hybrid Solar WA
48 AU$ 69 — AU$73
AU$59
H1 2023
16
Transmission WA
n/a AU$ 50 — AU$53
AU$17
H2 2023
15
Horizon
Hill (5)
Australia
Northern
Goldfields
Mount
Keith
132kV
Expansion
• Wind turbine component
deliveries in progress
• Construction activities
have commenced
• On track to be completed
on schedule
Long-term PPA executed
•
• Wind turbine component
deliveries in progress
• Construction activities
have commenced
• On track to be completed
on schedule
•
•
All major equipment
deliveries are complete
Solar panel installation is
complete
• On track to be completed
in early 2023
•
Engineering,
procurement, and
construction executed
• Construction activities
have commenced
• On track to be completed
on schedule
US$30-
US$33
AU$9-
AU$10
AU$6-
AU$7
(1) H1 or H2 is defined as the first or second half of the year.
(2) The PPA term is confidential for the White Rock wind projects and Horizon Hill wind project.
(3) This item is not defined and has no standardized meaning under IFRS and is forward-looking. Refer to the Additional IFRS Measures and
Non-IFRS Measures section of this MD&A for further discussion.
(4) The Garden Plain wind project is fully contracted, with Pembina off-taking 100 MW of the total 130 MW capacity of the facility and the
remaining 30 MW contracted to an investment-grade globally recognized customer. Refer to the Significant and Subsequent Events
section of this MD&A for further details.
(5) The expected average annual EBITDA and estimated capital spending for the White Rock wind projects and Horizon Hill wind projects
have been revised upwards based on the impact of the Inflation Reduction Act of 2022, which results in the projects qualifying for 100
per cent production tax credits, partially offset by incremental payments to the turbine supplier.
TransAlta Corporation • 2022 Integrated Report
M61
MANAGEMENT'S DISCUSSION AND ANALYSIS
Advanced-Stage Development
These projects have detailed engineering, advanced position in the interconnection queue and are
progressing offtake opportunities. The following table shows the pipeline of future growth projects currently
under advanced-stage development:
Project
Tempest
SCE Capacity Expansion
WaterCharger
Australia Transmission
Expansion
Type
Wind
Gas
Region
Alberta
Western Australia
Battery Storage
Alberta
Transmission Western Australia
Gross installed
capacity (MW) Estimated spend
Average annual
EBITDA(1)
100
94
180
n/a
$210-$230
$20-$23
AU$180-AU$200
AU$24-AU$28
$150-$180
$14-$17
AU$34-AU$36
AU$3-AU$4
(1) This item is not defined, has no standardized meaning under IFRS and is forward-looking. Refer to the Additional IFRS Measures and Non-
IFRS Measures section of this MD&A for further discussion.
Early-Stage Development
These projects are in the early stages and may or may not move ahead. Generally, these projects will have:
Begun securing land control;
Started environmental studies;
• Collected meteorological data;
•
•
• Confirmed appropriate access to transmission; and
•
Started preliminary permitting and other regulatory approval processes.
The following table shows the pipeline of future growth projects currently under early-stage development:
Project
Canada
Riplinger Wind
Red Rock
Willow Creek 1
Willow Creek 2
Sunhills Solar
McNeil Solar
Canadian Battery opportunity
Canadian Wind opportunities
Tent Mountain Pumped Storage
Brazeau Pumped Hydro
Alberta Thermal Redevelopment
United States
Old Town
Trapper Valley
Monument Road
Dos Rios
Prairie Violet
Big Timber
Oklahoma Solar
Milligan 3
Type
Wind
Wind
Wind
Wind
Solar
Solar
Battery
Wind
Hydro
Hydro
Various
Wind
Wind
Wind
Wind
Wind
Wind
Solar
Wind
Other Wind and Solar prospects
Wind and Solar
Centralia site redevelopment
Various
Region
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
New Brunswick
Various
Alberta
Alberta
Alberta
Illinois
Wyoming
Nebraska
Oklahoma
Illinois
Pennsylvania
Oklahoma
Nebraska
Various
Washington
Australia
Australian prospects
South Hedland Solar
Canada, United States and Australia
Gas, Solar, Wind
Solar
Western Australia
Western Australia
Gross installed
capacity (MW)
300
100
70
70
115
57
10
370
160
300-900
250-500
Total
1,802-2,652
185
225
152
242
130
50
100
126
409
250-500
Total
1,869-2,119
170
50
220
3,891-4,991
Total
Total
TransAlta Corporation • 2022 Integrated Report
M62
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Instruments
Financial instruments are used for proprietary trading purposes and to manage our exposure to interest rates,
commodity prices and currency fluctuations, as well as other market risks. We may currently use physical and
financial swaps, forward sale and purchase contracts, futures contracts, foreign exchange contracts, interest
rate swaps and options to achieve our risk management objectives. Some of our physical commodity
contracts have been entered into and are held for the purposes of meeting our expected purchase, sale or
usage requirements and, as such, are not considered financial instruments, and are not recognized as a
financial asset or financial liability. Other physical commodity contracts that are not held for normal purchase
or sale requirements, and derivative financial instruments are recognized on the Consolidated Statements of
Financial Position and are accounted for using the fair value method of accounting. The initial recognition of
fair value and subsequent changes in fair value can affect reported earnings in the period the change occurs
if hedge accounting is not elected. Otherwise, changes in fair value will generally not affect earnings until the
financial instrument is settled.
Some of our financial instruments and physical commodity contracts qualify for, and are recorded under,
hedge accounting rules. The accounting for those contracts, for which we have elected to apply hedge
accounting, depends on the type of hedge. Our financial instruments are mainly used for cash flow hedges or
non-hedges. These categories and their associated accounting treatments are explained in further detail
below.
For all types of hedges, we test for effectiveness at the end of each reporting period to determine if the
instruments are performing as intended and hedge accounting can still be applied. The financial instruments
we enter into are designed to ensure that future cash inflows and outflows are predictable. In a hedging
relationship, the effective portion of the change in the fair value of the hedging derivative does not impact net
earnings (loss), while any ineffective portion is recognized in net earnings (loss).
We have certain contracts in our portfolio that, at their inception, do not qualify for, or we have chosen not to
elect to apply, hedge accounting. For these contracts, we recognize in net earnings (loss) mark-to-market
gains and losses resulting from changes in forward prices compared to the price at which these contracts
were transacted. These changes in price alter the timing of earnings recognition, but do not necessarily
determine the final settlement amount received. The fair value of future contracts will continue to fluctuate as
market prices change. The fair value of derivatives that are not traded on an active exchange, or extend
beyond the time period for which exchange-based quotes are available, are determined using valuation
techniques or models.
Cash Flow Hedges
Cash flow hedges are categorized as project, foreign exchange, interest rate or commodity hedges and are
used to offset foreign exchange, interest rate and commodity price exposures resulting from market
fluctuations.
Foreign currency forward contracts may be used to hedge foreign exchange exposures resulting from
anticipated contracts and firm commitments denominated in foreign currencies, primarily related to capital
expenditures and currency exposures related to US-denominated debt.
Physical and financial swaps, forward sale and purchase contracts, futures contracts and options may be
used primarily to offset the variability in future cash flows caused by fluctuations in electricity and natural gas
prices. Foreign exchange forward contracts and cross-currency swaps may be used to offset the exposures
resulting from foreign-denominated long-term debt. Interest rate swaps may be used to convert the fixed
interest cash flows related to interest expense at debt to floating rates and vice versa.
In a cash flow hedge, changes in the fair value of the hedging instrument (a forward contract or financial
swap, for example) are recognized in risk management assets or liabilities and the related gains or losses are
recognized in other comprehensive income or loss ("OCI"). These gains or losses are subsequently
reclassified from OCI to net earnings (loss) in the same period as the hedged forecast cash flows impact net
earnings (loss) and offset the losses or gains arising from the forecast transactions. For project hedges, the
gains and losses reclassified from OCI are included in the carrying amount of the related PP&E.
TransAlta Corporation • 2022 Integrated Report
M63
MANAGEMENT'S DISCUSSION AND ANALYSIS
Hedge accounting follows a principles-based approach for qualifying hedges that is aligned with an entity's
approach to risk management. When we do not elect hedge accounting or when the hedge is no longer
effective and does not qualify for hedge accounting, the gains or losses as a result of changes in prices,
interest or exchange rates related to these financial instruments are recorded in net earnings (loss) in the
period in which they arise.
Net Investment Hedges
Foreign-denominated long-term debt is used to hedge exposure to changes in the carrying values of our net
investments in foreign operations that have a functional currency other than the Canadian dollar. Our net
investment hedges using US-denominated debt remain effective and in place. Gains or losses on these
instruments are recognized and deferred in OCI and reclassified to net earnings on the disposal of the foreign
operation. We also manage foreign exchange risk by matching foreign-denominated expenses with revenues,
such as offsetting revenues from our US operations with interest payments on our US-dollar debt.
Non-Hedges
Financial instruments not designated as hedges are used for proprietary trading and to reduce commodity
price, foreign exchange and interest rate risks. Changes in the fair value of financial instruments not
designated as hedges are recognized in risk management assets or liabilities and the related gains or losses
are recognized in net earnings (loss) in the period in which the change occurs.
Fair Values
The majority of fair values for our project, foreign exchange, interest rate, commodity hedges and non-hedge
derivatives are calculated using adjusted quoted prices from an active market or inputs validated by broker
quotes. We may enter into commodity transactions involving non-standard features for which market-
observable data is not available. These transactions are defined under IFRS as Level III instruments. Level III
instruments incorporate inputs that are not observable from the market and fair value is therefore determined
using valuation techniques. Fair values are validated by using reasonably possible alternative assumptions as
inputs to valuation techniques and any material differences are disclosed in the notes to the consolidated
financial statements. At Dec. 31, 2022, Level III instruments had a net liabilities carrying value of $782 million
(2021 – net asset $159 million). Our risk management profile and practices have not changed materially from
Dec. 31, 2021. Refer to the Material Accounting Policies and Critical Accounting Estimates section of this
MD&A for further details regarding valuation techniques.
Material Accounting Policies and Critical Accounting Estimates
The selection and application of accounting policies is an important process that has developed as our
business activities have evolved and as accounting rules and guidance have changed. Accounting
rules generally do not involve a selection among alternatives, but involve an implementation and
interpretation of existing rules and the use of judgment relative to the circumstances existing in the business.
Every effort is made to comply with all applicable rules on or before the effective date and we believe the
proper implementation and consistent application of accounting rules is critical.
However, not all situations are specifically addressed in the accounting literature. In these cases, our best
judgment is used to adopt a policy for accounting for these situations. We draw analogies to similar situations
and the accounting guidelines governing them, consider foreign accounting standards and consult with our
independent auditors about the appropriate interpretation and application of these policies. Each of the
critical accounting policies involves complex situations and a high degree of judgment either in the application
and interpretation of existing literature or in the development of estimates that impact our consolidated
financial statements.
Our material accounting policies are described in Note 2 of the consolidated financial statements. Each policy
involves a number of estimates and assumptions to be made about matters that are uncertain at the time the
estimate is made. Different estimates, with respect to key variables used for the calculations, or changes to
estimates, could potentially have a material impact on our financial position or results of operations. Estimates
to the extent to which geopolitical events such as the Russia-Ukraine conflict or inflationary and supply chain
dynamics may, directly or indirectly, impact the Company's operations, financial results and conditions in
future periods are also subject to significant uncertainty. Uncertainty related to COVID-19 and the geopolitical
events has been considered in our estimates for the year ended Dec. 31, 2022.
TransAlta Corporation • 2022 Integrated Report
M64
MANAGEMENT'S DISCUSSION AND ANALYSIS
We have discussed the development and selection of these critical accounting estimates with the Audit,
Finance and Risk Committee ("AFRC") of the Board of Directors and our independent auditors. The AFRC has
reviewed and approved our disclosure relating to critical accounting estimates in this MD&A. These critical
accounting estimates are described as follows:
Revenue Recognition
Revenue from Contracts with Customers
Identification of Performance Obligations
Where contracts contain multiple promises for goods or services, management exercises judgment in
determining whether goods or services constitute distinct goods or services or a series of distinct goods or
services that are substantially the same and that have the same pattern of transfer to the customer. The
determination of a performance obligation affects whether the transaction price is recognized at a point in
time or over time. Management considers both the mechanics of the contract and the economic and
operating environment of the contract in determining whether the goods or services in a contract are distinct.
Transaction Price
In determining the transaction price and estimates of variable consideration, management considers the past
history of customer usage and capacity requirements when estimating the goods and services to be provided
to the customer. The Company also considers the historical production levels and operating conditions for its
variable generating assets.
Allocation of Transaction Price to Performance Obligations
When multiple performance obligations are present in a contract, transaction price is allocated to each
performance obligation in an amount that depicts the consideration the Company expects to be entitled to in
exchange for transferring the good or service.
The Company’s contracts generally outline a specific amount to be invoiced to a customer associated with
each performance obligation in the contract. Where contracts do not specify amounts for individual
performance obligations, the Company estimates the amount of the transaction price to allocate to individual
performance obligations based on their standalone selling price, which is primarily estimated based on the
amounts that would be charged to customers under similar market conditions.
Satisfaction of Performance Obligations
The satisfaction of performance obligations requires management to use judgment as to when control of the
underlying good or service transfers to the customer. Determining when a performance obligation is satisfied
affects the timing of revenue recognition. Management considers both customer acceptance of the good or
service and the impact of laws and regulations such as certification requirements, in determining when this
transfer occurs. Management also applies judgment in determining whether the invoice practical expedient
permits recognition of revenue at the invoiced amount if that invoiced amount corresponds directly with the
entity's performance to date.
Revenue from Other Sources
Revenue from Derivatives
Commodity risk management activities involve the use of derivatives such as physical and financial swaps,
forward sales contracts, futures contracts and options that are used to earn revenues and to gain market
information. These derivatives are accounted for using fair value accounting. The determination of the fair
value of commodity risk management contracts and derivative instruments is complex and relies on
judgments concerning future prices, volatility and liquidity, among other factors. Some of our derivatives are
not traded on an active exchange or extend beyond the time period for which exchange-based quotes are
available, requiring us to use internal valuation techniques or other models such as numerical derivative
valuation or scenario analysis.
Merchant Revenue
Revenues from non-contracted capacity (i.e., merchant) are comprised of energy payments, at market price,
for each MWh produced and are recognized upon delivery.
TransAlta Corporation • 2022 Integrated Report
M65
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Instruments
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. Fair values can be
determined by reference to prices for instruments in active markets to which we have access. In the absence
of an active market, we determine fair values based on valuation models or by reference to other similar
products in active markets.
Fair values determined using valuation models require the use of assumptions. In determining those
assumptions, we look primarily to external readily observable market inputs. However, if not available, we use
inputs that are not based on observable market data.
Level Determinations and Classifications
The Level I, II and III classifications in the fair value hierarchy are utilized by the Company. The fair value
measurement of a financial instrument is included in only one of the three levels, the determination of which is
based on the lowest level input that is significant to the derivation of the fair value. Refer to Note 14(B)(I) and
(II) from our consolidated financial statements for further details on the inputs used for each level.
The effect of using reasonably possible alternative assumptions as inputs to valuation techniques for
contracts included in the Level III fair value measurements at Dec. 31, 2022, is an estimated total upside of
$193 million (2021 – $105 million) and total downside of $287 million (2021 – $220 million) impact to the
carrying value of the financial instruments. The amount of $15 million upside (2021 – $22 million) and $163
million downside (2021 – $145 million) in stress value stems from a power sale contract in Pacific Northwest
that is designated as a cash flow hedge. Fair values are stressed for unobservable inputs, which can include
variable volumes, unobservable prices and wind discounts, among other inputs. The variable volumes are
stressed up and down based on historically available production data. Prices are stressed for longer-term
deals where there are no liquid market quotes using various internal and external forecasting sources to
establish a high and a low price range. Wind discounts represent price to volume relationships and are
stressed specific to each location.
In addition to the Level III fair value measurements discussed above, the Brookfield Investment Agreement
allows Brookfield the option to exchange all of the outstanding exchangeable securities into an equity
ownership interest of up to a maximum of 49 per cent in an entity formed to hold TransAlta’s Alberta Hydro
Assets after Dec. 31, 2024. The fair value of the option to exchange is considered a Level III fair value
measurement, with an estimated downside of $25 million (2021 – $32 million) potential impact to the carrying
value of nil as at Dec. 31, 2022 (2021 – nil). The sensitivity analysis has been prepared using the Company’s
assessment that a change in the implied discount rate of the future cash flow of one per cent is a reasonably
possible change.
Valuation of PP&E and Associated Contracts
At the end of each reporting period, we assess whether there is any indication that PP&E and finite life
intangible assets are impaired or whether a previously recognized impairment may no longer exist or may
have decreased.
TransAlta Corporation • 2022 Integrated Report
M66
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our operations, the market and business environment are routinely monitored and judgments and
assessments are made to determine whether an event has occurred that indicates a possible impairment. If
such an event has occurred, an estimate is made of the recoverable amount of the asset or cash-generating
unit (“CGU”) to which the asset belongs. A CGU is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from other assets or groups of assets and
goodwill is allocated to each CGU or group of CGUs that is expected to benefit from the synergies of the
acquisition from which the goodwill arose. The recoverable amount is the higher of an asset’s fair value less
costs of disposal or its value in use. Fair value is the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date. In determining fair value less costs of
disposal, information about third-party transactions for similar assets is used and if none is available, other
valuation techniques, such as discounted cash flows, are used. Value in use is computed using the present
value of management’s best estimates of future cash flows based on the current use and present condition of
the asset. In estimating either fair value less costs of disposal or value in use using discounted cash flow
methods, estimates and assumptions must be made about sales prices, cost of sales, production, fuel
consumed, capital expenditures, retirement costs and other related cash inflows and outflows over the life of
the facilities, which can range from 30 to 60 years. In developing these assumptions, management uses
estimates of contracted and future market prices based on expected market supply and demand in the region
in which the facility operates, anticipated production levels, planned and unplanned outages, changes to
regulations and transmission capacity or constraints for the remaining life of the facilities.
Discount rates are determined by employing a weighted average cost of capital methodology that is based on
capital structure, cost of equity and cost of debt assumptions based on comparable companies with similar
risk characteristics and market data as the asset, CGU or group of CGUs subject to the test. These estimates
and assumptions are susceptible to change from period to period and actual results can and often do, differ
from the estimates and can have either a positive or negative impact on the estimate of the impairment
charge and may be material.
The impairment outcome can also be impacted by the determination of CGUs or groups of CGUs for asset
and goodwill impairment testing. The allocation of goodwill is reassessed upon changes in the composition of
segments, CGUs or groups of CGUs. In respect of determining CGUs, significant judgment is required to
determine what constitutes independent cash flows between power facilities that are connected to the same
system. We evaluate the market design, transmission constraints and the contractual profile of each facility,
as well as our commodity price risk management plans and practices, in order to inform this determination.
With regard to the allocation or reallocation of goodwill, significant judgment is required to evaluate synergies
and their impacts. Minimum thresholds also exist with respect to segmentation and internal monitoring
activities. We evaluate synergies with regard to opportunities from combined talent and technology,
functional organization and future growth potential and we consider our own performance measurement
processes in making this determination. No changes arose in our CGUs in 2022.
Impairment charges can be reversed in future periods if circumstances improve. No assurances can be given
if any reversal will occur or the amount or timing of any such reversal. Refer to the Financial Position section
of this MD&A for further details.
Asset Impairments
Hydro
During 2022, the Company recorded net impairment charges of $21 million on four hydro facilities as a result
of changes in key assumptions, that included significant increases in discount rates, changes in pricing and
changes in estimated future cash flows.
Wind and Solar
During 2022, the Company recorded net impairment charges of $43 million on five wind facilities and one
solar facility as a result of changes in key assumptions, that included significant increases in discount rates,
changes in pricing and changes in estimated future cash flows.
Valuation of Goodwill
We evaluate goodwill for impairment at least annually, or more frequently if indicators of impairment exist. If
the carrying amount of a CGU or group of CGUs, including goodwill, exceeds the unit’s fair value, the excess
represents a goodwill impairment loss.
TransAlta Corporation • 2022 Integrated Report
M67
MANAGEMENT'S DISCUSSION AND ANALYSIS
For purposes of the 2022, 2021 and 2020 annual goodwill impairment reviews, the Company determined the
recoverable amounts of the CGUs by calculating the fair value less costs of disposal using discounted cash
flow projections based on the Company’s long-range forecasts for the period extending to the last planned
asset retirement in 2072. The resulting fair value measurement is categorized within Level III of the fair value
hierarchy. We have determined there were no goodwill impairments for 2022, 2021 and 2020.
Determining the fair value of the CGUs or group of CGUs is susceptible to changes from period to period as
management is required to make assumptions about future cash flows, including estimates of contracted and
future market prices based on expected market supply and demand in the region in which the facility
operates, anticipated production levels, planned and unplanned outages, changes to regulations and
transmission capacity or constraints for the remaining life of the facilities.
Project Development Costs
Project development costs include external, direct and incremental costs that are necessary for completing
an acquisition or construction project. The appropriateness of capitalization of these costs is evaluated each
reporting period and amounts capitalized for projects no longer probable of occurring are charged to net
earnings (loss).
Useful Life of PP&E
Each significant component of an item of PP&E is depreciated over its estimated useful life. A component is a
tangible asset that can be separately identified as an asset and is expected to provide a benefit of greater
than one year. Estimated useful lives are determined based on current facts and past experience and take
into consideration the anticipated physical life of the asset, existing long-term sales agreements and
contracts, current and forecasted demand, the potential for technological obsolescence and regulations. The
useful lives of PP&E and depreciation rates used are reviewed at least annually to ensure they continue to be
appropriate.
Change in Estimate - Useful Lives
During 2022, the Company adjusted the useful lives of certain assets included in the Gas segment to reflect
changes made based on the future operating expectations of the assets. This resulted in an increase of
$132 million in depreciation expense that was recognized in the Consolidated Statement of Earnings (Loss) in
2022.
Leases
In determining whether our contracts contain, or are, leases, management must use judgment in assessing
whether the contract provides the customer with the right to substantially all of the economic benefits from
the use of the asset during the lease term and whether the customer obtains the right to direct the use of the
asset during the lease term. For those agreements considered to contain, or be, leases, further judgment is
required to determine the lease term by assessing whether termination or extension options are reasonably
certain to be exercised. Judgment is also applied in identifying in-substance fixed payments (included) and
variable payments that are based on usage or performance factors (excluded) and in identifying lease and
non-lease components (services that the supplier performs) of contracts and in allocating contract payments
to lease and non-lease components.
For leases where we are a lessor, judgment is required to determine if substantially all of the significant risks
and rewards of ownership are transferred to the customer or remain with us, to appropriately account for the
agreement as either a finance or operating lease. These judgments can be significant and impact how we
classify amounts related to the arrangement as either PP&E or as a finance lease receivable on the
Consolidated Statements of Financial Position and therefore the amount of certain items of revenue and
expense are dependent upon such classifications.
TransAlta Corporation • 2022 Integrated Report
M68
MANAGEMENT'S DISCUSSION AND ANALYSIS
Income Taxes
Preparation of the consolidated financial statements involves determining an estimate of, or provision for,
income taxes in each of the jurisdictions in which we operate. The process also involves making an estimate
of taxes currently payable and income taxes expected to be payable or recoverable in future periods, referred
to as deferred income taxes. An assessment must also be made to determine the likelihood that our future
taxable income will be sufficient to permit the recovery of deferred income tax assets. To the extent that such
recovery is not probable, deferred income tax assets must be reduced. The reduction of the deferred income
tax asset can be reversed if the estimated future taxable income improves. No assurances can be given if any
reversal will occur or the amount or timing of any such reversal. Management must exercise judgment in its
assessment of continually changing tax interpretations, regulations and legislation to ensure deferred income
tax assets and liabilities are complete and fairly presented. Differing assessments and applications than our
estimates could materially impact the amount recognized for deferred income tax assets and liabilities. Our
tax filings are subject to audit by taxation authorities. The outcome of some audits may change our tax
liability, although we believe that we have adequately provided for income taxes in accordance with IFRS
based on all information currently available. The outcome of pending audits is not known nor is the potential
impact on the consolidated financial statements determinable.
Employee Future Benefits
We provide selected pension and other post-employment benefits to employees, such as health and dental
benefits. The cost of providing these benefits is dependent upon many factors, including actual plan
experience and estimates and assumptions about future experience.
The liabilities for pension, other post-employment benefits and associated pension costs included in annual
compensation expenses are impacted by employee demographics, including age, compensation levels,
employment periods, the level of contributions made to the plans and earnings on plan assets.
Changes to the provisions of the plans may also affect current and future pension costs. Pension costs may
also be significantly impacted by changes in key actuarial assumptions, including, for example, the discount
rates used in determining the defined benefit obligation and the net interest cost on the net defined benefit
liability. The discount rate used to estimate our obligation reflects high-quality corporate fixed income
securities currently available and expected to be available during the period to maturity of the pension
benefits.
Defined Benefit Obligation
The liability for pension and post-employment benefits and associated costs included in compensation
expenses are impacted by estimates related to changes in key actuarial assumptions, including discount
rates. The defined benefit obligation has decreased by $78 million to $150 million as at Dec. 31, 2022, from
$228 million as at Dec. 31, 2021. The decrease is primarily driven by increases in discount rates in 2022,
largely driven by increases in market benchmark rates and the voluntary contribution of $35 million made to
the Sunhills Mining Ltd. Pension Plan, partially offset by a decrease in plan assets due to poor market returns.
The Company made a voluntary contribution of $35 million during 2022 to further improve the funded status
of the Sunhills Mining Ltd. Pension Plan for the Highvale mine and to support the employees affected by the
closure of the Highvale mine in 2021 and our transition off-coal to cleaner sources. The contribution reduces
the amount of the Company's future funding obligations, including amounts secured by the letters of credit.
A 1 per cent increase in discount rates would have a $39 million impact on the defined benefit obligation.
Decommissioning and Restoration Provisions
We recognize decommissioning and restoration provisions for generating facilities and mine sites in the
period in which they are incurred if there is a legal or constructive obligation to remove the facilities and
restore the site. The amount recognized as a provision is the best estimate of the expenditures required to
settle the provision. Expected values are probability weighted to deal with the risks and uncertainties inherent
in the timing and amount of settlement of many decommissioning and restoration provisions. Expected values
are discounted at the current market-based risk-free interest rate adjusted to reflect the market’s evaluation
of our credit standing.
The Company recognizes provisions for decommissioning obligations. Initial decommissioning provisions and
subsequent changes thereto, are determined using the Company’s best estimate of the required cash
expenditures, adjusted to reflect the risks and uncertainties inherent in the timing and amount of settlement.
TransAlta Corporation • 2022 Integrated Report
M69
MANAGEMENT'S DISCUSSION AND ANALYSIS
During 2022, the Company accelerated the expected timing on decommissioning and restoration for certain
facilities. This increased the decommissioning and restoration provision by $95 million of which $46 million
increased operating assets in PP&E and $49 million was recognized as an impairment charge in net earnings
related to retired assets.
In 2021, the Company increased the decommissioning and restoration provision $167 million related to an
engineering study on the decommissioning costs of the wind sites of $120 million and the Sundance and
Keephills Units useful lives of $47 million. Of the total increase in decommissioning and restoration provisions,
$133 million increased operating assets in PP&E and $34 million was recognized as an impairment charge in
net earnings related to retired assets.
During 2022, the decommissioning and restoration provision decreased by $225 million (2021 – $6 million)
due to a significant increase in discount rates, largely driven by increases in market benchmark rates. On
average, discount rates increased with rates ranging from 7.0 to 9.7 per cent as at Dec. 31, 2022 (2021 –3.6
to 6.5 per cent). This has resulted in a corresponding decrease in PP&E of $123 million (2021 – $6 million) on
operating assets and recognition of a $102 million (2021 – nil) impairment reversal in net earnings related to
retired assets.
We estimate the undiscounted amount of cash flow required to settle the decommissioning and restoration
provisions is approximately $1.6 billion, which will be incurred between 2023 and 2072. The majority of these
costs will be incurred between 2023 and 2050.
Other Provisions
Where necessary, we recognize provisions arising from ongoing business activities, such as interpretation
and application of contract terms, ongoing litigation and force majeure claims. These provisions and
subsequent changes thereto, are determined using our best estimate of the outcome of the underlying event
and can also be impacted by determinations made by third parties, in compliance with contractual
requirements. The actual amount of the provisions that may be required could differ materially from the
amount recognized.
Classification of Joint Arrangements
Upon entering into a joint arrangement, the Company must classify it as either a joint operation or joint
venture and the classification affects the accounting for the joint arrangement. In making this classification,
the Company exercises judgment in evaluating the terms and conditions of the arrangement to determine
whether the parties have rights to the assets and obligations or rights to the net assets. Factors such as the
legal structure, contractual arrangements and other facts and circumstances, such as where the purpose of
the arrangement is primarily for the provision of the output to the parties and when the parties are
substantially the only source of cash flows for the arrangement, must be evaluated to understand the rights
of the parties to the arrangement.
Significant Influence
Upon entering into an investment, the Company must classify it as either an investment as an associate or an
investment under IFRS 9. In making this classification, the Company exercises judgment in evaluating whether
the Company has significant influence over the investee. Significant influence is the power to participate in
the financial and operating policy decisions of the investee, but is not control or joint control over those
policies. If the Company holds 20 per cent or more of the voting rights in the investee, it is presumed that the
entity has significant influence, unless it can be clearly demonstrated that this is not the case. Other factors
such as representation on the board of directors, participation in policy-making processes, material
transactions between the Company and investee, interchange of managerial personnel or providing essential
technical information are considered when assessing if the Company has significant influence over an
investee.
TransAlta Corporation • 2022 Integrated Report
M70
MANAGEMENT'S DISCUSSION AND ANALYSIS
Accounting Changes
Current Accounting Changes
International Accounting Standards ("IAS") 37 Provisions, Contingent
Amendments to
Liabilities and Contingent Assets
On May 14, 2020, the IASB issued Onerous Contracts – Cost of Fulfilling a Contract and amendments to IAS
37 Provisions, Contingent Liabilities and Contingent Assets to specify which costs to include when assessing
whether a contract will be loss-making. The amendments are effective for annual periods beginning on or
after Jan. 1, 2022, and the Company adopted these amendments as of Jan. 1, 2022. The amendments are
effective for contracts for which an entity has not yet fulfilled all its obligations on or after the effective date.
No adjustments resulted on adoption of the amendments on Jan. 1, 2022.
Future Accounting Changes
Amendments to IAS 12 Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction
On May 7, 2021, the IASB issued amendments to IAS 12 Deferred Tax Related to Assets and Liabilities Arising
from a Single Transaction. The amendments clarify that the initial recognition exemption under IAS 12 does
not apply to transactions such as leases and decommissioning obligations. These transactions give rise to
equal and offsetting temporary differences in which deferred tax should be recognized.
The amendments are effective for annual periods beginning on or after Jan. 1, 2023, with early application
permitted. The Company's current position aligns with the amendment and no financial impact is therefore
expected upon adoption on the effective date.
Amendments to IAS 1 Classification of Liabilities as Current or Non‐Current
In October 2022, the IASB issued amendments to clarify how conditions with which an entity must comply
within 12 months after the reporting period affect the classification of a liability, in addition to the amendment
from January 2020 where
IAS 1 Presentation of Financial
Statements, to provide a more general approach to the presentation of liabilities as current or non‐current
based on contractual arrangements
in place at the reporting date. These amendments specify
that the rights and conditions existing at the end of the reporting period are relevant in determining whether
the Company has a right to defer settlement of a liability by at least 12 months, provided that management's
expectations are not a relevant consideration as to whether the Company will exercise its rights to defer
settlement of a liability and clarify when a liability is considered settled.
issued amendments
IASB
the
to
The amendments are effective for annual periods beginning on or after Jan. 1, 2024, and are to be applied
retrospectively. The Company has not yet determined the impact of these amendments on its consolidated
financial statements.
Amendments to IFRS 16 Lease Liability in a Sale-and-Leaseback
In September 2022, the IASB issued Lease Liability in a Sale and Leaseback, which amends IFRS 16 Leases to
provide additional specifications when subsequently measuring the lease liability that require the seller-lessee
to determine lease payments and revised lease payments in a way that does not result in the seller-lessee
recognizing any amount of the gain or loss that relates to the right of use it retains. The current effective date
is Jan. 1, 2024. The Company is currently reviewing the impacts of this amendment on its consolidated
financial statements.
Comparative Figures
Certain comparative figures have been reclassified to conform to the current period’s presentation. These
reclassifications did not impact previously reported net earnings (loss).
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Environmental, Social and Governance
Sustainability, or ESG management and performance, is a priority at TransAlta. Sustainability is one of our
core values, which means it is part of our corporate culture. We perpetually strive to further integrate
sustainability into our governance, decision-making, risk management and day-to-day business processes,
while enabling our growth strategy. The ultimate outcome of our sustainability focus is continuous
improvement on key, material ESG issues and ensuring our economic value creation is balanced with a value
proposition for the environment and our stakeholders.
Our key strategic sustainability pillars build on our corporate strategy and weave through our business. Our
track record in these areas illustrates our commitment to sustainability (including climate change leadership
and safety). In other areas, where we have set new goals in recent years (including equity, diversity and
inclusion), we believe the focus will only strengthen our corporate strategy and support value creation into
the future. Our pillars include:
•
•
•
•
•
Clean, Reliable and Sustainable Electricity Production
Safe, Healthy, Diverse and Engaged Workplace
Positive Indigenous, Stakeholder and Customer Relationships
Progressive Environmental Stewardship
Technology and Innovation
Reporting on Our Material Sustainability Factors
TransAlta has been reporting on sustainability since 1994. The Company's ESG reporting content is integrated
within this MD&A to provide information on how ESG affects our business (including material focus areas) and
is guided by leading ESG reporting frameworks. We adopt guidance from the International Integrated
Reporting Framework, the Global Reporting Initiative and the Sustainability Accounting Standards Board
("SASB") requirements for electric utilities and power generators. We continue to monitor the development of
sustainability and climate-related disclosure requirements to assess our future reporting, such as the
International Sustainability Standards Board (“ISSB”), the Taskforce on Nature-related Financial Disclosures
(“TNFD”), the Canadian Securities Administrators, and the U.S. Securities and Exchange Commission.
Climate-related data to be disclosed is informed by the recommendations of the Task Force on Climate-
related Financial Disclosures ("TCFD") and climate change questionnaires from CDP (the global disclosure
system for environmental impacts known formerly as the Carbon Disclosure Project). In 2022, we reviewed
and updated our management response to our 2021 climate-related scenario analysis that enhanced our
alignment with both international sustainability frameworks. We also developed our first consolidated Climate
Transition Plan and prepared climate-related financial metrics. GHG emissions data for scopes 1 and 2 follow
the accounting and reporting standards of the GHG Protocol. We continue to improve our scope 3 accounting
for future reporting in alignment with the GHG Protocol. For further information on climate change
management and the findings of our scenario analysis, refer to the Decarbonizing Our Energy Mix section of
this MD&A.
The disclosure of our most relevant sustainability factors is guided by our sustainability materiality
assessment. In 2022, we refreshed our materiality assessment by evaluating key sector-specific research on
material issues, supported by internal and external engagement on key sustainability issues. Our Enterprise
Risk Management ("ERM") program is designed to help the organization focus its efforts on key enterprise
risks, within the planning horizon, that could significantly impact the success of its strategy, including its
sustainability objectives. We consider a sustainability factor as material if it could substantively affect our
ability to create value.
In 2022, we reviewed key topics identified within SASB, TCFD, IFRS and TNFD to inform the identification of
our material sustainability factors. We also considered sustainability factors from the electricity sector
through Electricity Canada’s 2021 Sustainable Electricity Report. In addition, we conducted a peer review of
material sustainability factors. This work was validated by our executive team and resulted in the
identification of 21 material sustainability factors presented in the Sustainability Governance section of this
MD&A.
For further guidance on our risk factors, refer to the Governance and Risk Management section of this MD&A.
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Accelerating Our Business Transformation to Become Net-Zero by 2045
At TransAlta, our mission is to provide safe, low-cost and reliable clean electricity to our customers. As a
customer-centred clean electricity leader, we are well positioned to support our customers' ESG and
sustainability goals. To achieve this goal, in today's evolving economy and increasingly electrified world, our
strategy focuses on renewable electricity growth and a deep commitment to sustainability. We believe that
we are uniquely positioned as the world continues to electrify and adopt sustainability practices. For further
information, refer to the Description of the Business section of this MD&A.
Our President and Chief Executive Officer, John Kousinioris, speaks about our decarbonization journey below.
TransAlta has adopted a 2045 net-zero target. Why did the company choose to take that step?
"Our new net-zero target is a function of our growth strategy. Simply put, by focusing on growing our
contracted renewable assets, we are growing our business and not our emissions. This type of growth, along
with our investments in new technologies and ongoing participation in environmental markets, makes us
confident that we will be able to reach this new target. We believe it is important for the Company to publicly
hold itself accountable for delivering these results and ensuring our investors, customers and stakeholders
are aware of where we are going in this important effort."
How does the Company’s strategy align with the Paris Agreement goals?
“We are committed to maintaining a leadership position in climate change and contributing to a net-zero
future. Our growth strategy focuses on renewable and storage projects, which is in line with the Paris
Agreement goal to limit global warming to 1.5°C. On a percentage basis, TransAlta has already achieved
emissions reductions beyond the 2030 national targets in our operating jurisdictions and we anticipate further
reductions before the end of the decade. Our GHG reduction trajectory is consistent with the Paris
Agreement. Our public policy engagement is aligned with TransAlta’s climate change commitments, and
supports appropriate policy measures to mitigate climate risks.”
What technologies will TransAlta adopt to help customers to decarbonize?
"TransAlta helps our customers by delivering and operating reliable renewable and storage projects and on-
site generation that meet their needs. Underneath that core commitment is a set of technologies and
contracting options that we tailor to ensure customers receive the energy they require and the environmental
outcomes that are aligned with their ESG commitments. Since 2021, our Energy Innovation team has been
building our expertise in emerging technologies. This work led to a $2 million equity investment in Ekona for
commercialization of a methane pyrolysis technology platform, which produces cleaner and lower-cost
turquoise hydrogen. We have also committed to investing US$25 million over the next four years in the
Energy Impact Partners Frontier Fund 1. This allows us to identify, pilot and commercialize technologies that
will support our decarbonization goals. We will continue to make strategic investments moving forward. In
doing so, we will strengthen our position as a customer-centric clean electricity partner and mitigate
technology risks to our merchant assets."
How can the Company make its energy transition work for people?
“Our energy transition is focused on implementing decarbonization strategies within an inclusive transition
framework. For example, since 2015, TransAlta has been investing US$55 million over 10 years to support
energy efficiency, economic and community development, education and retraining initiatives in Washington
State. In Alberta, since 2016, we have committed to investing in programs and initiatives to support the
communities surrounding the plants negatively impacted by the phase-out of coal generation during the
transition. We can never understate the difficulty of these transitions for our workers and the communities
where our operations are changing. Our goal is to work through the transition and contribute to a positive
future where new opportunities emerge.”
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MANAGEMENT'S DISCUSSION AND ANALYSIS
2023+ Sustainability Targets
Our 2023 and longer-term sustainability targets support the success of our business so that the Company will
continue to be positioned as an ESG leader in the future. Goals and targets are established to improve our
ESG performance and manage current and emerging material sustainability issues in support of the United
Nations Sustainable Development Goals ("UN SDGs") and the Future-Fit Business Benchmark, which also
defines sustainable goals for businesses. TransAlta is committed to decarbonizing our energy generation and
accelerating clean energy growth. We believe that we can make a greater positive impact on UN SDG 7
“Affordable and Clean Energy” and SDG 13 “Climate Action”, while supporting seven other SDGs.
TransAlta has adopted five new sustainability targets in the areas of climate change, biodiversity, safety and
supply chain.
We adopted a more stringent climate-related target to achieve net-zero for 100 per cent of TransAlta’s scope
1 and 2 GHG emissions by 2045. In 2021, TransAlta approved a climate-related target to reduce 75 per cent
of our scope 1 and 2 GHG emissions by 2026 from a 2015 base year. We estimate that this target is in line
with the latest climate science and the electricity sector decarbonization pathway to limit global warming to
1.5°C and meet the Paris Agreement goals. We have also committed to verifying and disclosing 80 per cent of
our total scope 3 emissions by 2024.
In addition, TransAlta approved two new biodiversity targets that support the intent of the TNFD
recommendations.
We also enhanced the target of our Total Recordable Injury Frequency ("TRIF") and a new supply chain target
was set to integrate sustainability considerations into our supply chains.
Our targets to reduce air emissions and fleet-wide water consumption were achieved in 2022, four years
ahead of the 2026 target date. In 2023, we will review setting new targets for air emissions and water
consumption consistent with our commitment to continuously improve our environmental performance.
Targets are outlined below:
ESG Alignment: Environmental
Sustainability goal
Sustainability target
Reclaim land utilized for
mining
By 2040, complete full reclamation of
our Centralia coal mine in Washington
State
Alignment with UN SDG Target or Future-
Fit Business Benchmark
Future-Fit Business Benchmark: "Positive
Pursuits 13: Ecosystems are restored"
By 2046, complete full reclamation of
our Highvale coal mine in Alberta
Future-Fit Business Benchmark: "Positive
Pursuits 13: Ecosystems are restored"
Responsible water
management
By 2026, reduce fleet-wide water
consumption (withdrawals minus
discharge) by 20 million m3 or 40 per
cent over the 2015 baseline
Reduce air emissions
By 2026, achieve a 95 per cent
reduction of SO2 emissions and an 80
per cent reduction of NOx emissions
below 2005 levels
Protecting nature and
biodiversity
By 2024, assess and disclose nature-
related risks and opportunities including
TransAlta’s dependencies and impacts
on ecosystems, land, water and air
Achieve zero biodiversity-related
incidents
UN SDG Target 6.4: "By 2030,
substantially increase water-use efficiency
across all sectors and ensure sustainable
withdrawals and supply of freshwater to
address water scarcity and substantially
reduce the number of people suffering
from water scarcity"
UN SDG Target 9.4: "By 2030, upgrade
infrastructure and retrofit industries to
make them sustainable, with increased
resource-use efficiency and greater
adoption of clean and environmentally
sound technologies and industrial
processes"
UN SDG Target 15.5: "Take urgent and
significant action to reduce the
degradation of natural habitats, halt the
loss of biodiversity and, by 2020, protect
and prevent the extinction of threatened
species”
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Sustainability goal
Sustainability target
Alignment with UN SDG Target or Future-
Fit Business Benchmark
Reduce GHG emissions
By 2026, achieve a 75 per cent
reduction of scope 1 and 2 GHG
emissions from 2015 base year
UN SDG Target 13.2: "Integrate climate
change measures into national policies,
strategies and planning"
By 2045, achieve net-zero for 100 per
cent of TransAlta’s scope 1 and 2 GHG
emissions
By 2024, verify and disclose 80 per
cent of TransAlta’s scope 3 emissions
ESG Alignment: Social
Sustainability goal
Sustainability target
Reduce safety incidents
Achieve a Total Recordable Injury
Frequency rate below 0.32
Integrate sustainability into
supply chain
By 2024, 80 per cent of our spend will
be with suppliers that have a
sustainability policy or commitment
Support prosperous
Indigenous communities
Support equal access to all levels of
education for youth and Indigenous
peoples through financial support and
employment opportunities
Provide Indigenous cultural awareness
training to all TransAlta employees by
the end of 2023
ESG Alignment: Governance
Sustainability goal
Sustainability target
Strengthen gender equality
Achieve 50 per cent female
representation on the Board by 2030
Achieve at least 40 per cent female
employment among all employees of
the Company by 2030
Maintain equal pay for women in
equivalent roles as men
Alignment with UN SDG Target or Future-
Fit Business Benchmark
UN SDG Target 8.8: "Protect labour rights
and promote safe and secure working
environments for all workers, including
migrant workers, in particular women
migrants, and those in precarious
employment"
UN SDG Target 12.7: “Promote public
procurement practices that are
sustainable, in accordance with national
policies and priorities”
UN SDG Target 4.5: "By 2030, eliminate
gender disparities in education and ensure
equal access to all levels of education and
vocational training for the vulnerable,
including persons with disabilities,
Indigenous peoples and children in
vulnerable situations"
UN SDG Target 12.8: "By 2030, ensure that
people everywhere have the relevant
information and awareness for sustainable
development and lifestyles in harmony with
nature"
Alignment with UN SDG Target or Future-
Fit Business Benchmark
UN SDG Target 5.5: "Ensure women’s full
and effective participation and equal
opportunities for leadership at all levels of
decision making in political, economic and
public life"
Demonstrate leadership on
ESG reporting within
financial disclosures
Maintain our position as a leader on
integrated ESG disclosure through
increased annual alignment with leading
sustainability disclosure frameworks
ESG Alignment: Environmental and Social
Sustainability goal
Sustainability target
Coal transition
Clean energy solutions for
customers
No further coal generation by the end of
2025 with 100 per cent of our owned
net generation capacity to be from
renewables and gas
Develop new renewable projects that
support customer sustainability goals to
achieve both long-term power price
affordability and carbon reductions
UN SDG Target 12.6: "Encourage
companies, especially large and
transnational companies, to adopt
sustainable practices and to integrate
sustainability information into their
reporting cycle"
Alignment with UN SDG Target or Future-
Fit Business Benchmark
UN SDG Target 7.1: "By 2030, ensure
universal access to affordable, reliable and
modern energy services"
UN SDG Target 7.2: "By 2030, increase
substantially the share of renewable
energy in the global energy mix"
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Our 2022 Sustainability Performance
In 2022, we achieved our target to reduce TransAlta's total waste generation by 80 per cent over a 2019
baseline. We also achieved our 2026 targets to reduce air emissions and water consumption. In 2022,
TransAlta's strong safety performance was a key accomplishment amongst our social performance metrics.
Our TRIF exceeded our exceptional performance target and was our best on record.
Performance against our 2022 sustainability targets is outlined below:
ESG Alignment: Environmental
Sustainability goal
Sustainability target
Results
Comments
Reclaim land utilized for
mining
By 2040, complete full
reclamation of our Centralia coal
mine in Washington State
On track
Reclamation work at Centralia is underway
Responsible water
management
By 2046, complete full
reclamation of our Highvale coal
mine in Alberta
By 2026, reduce fleet-wide
water consumption (withdrawals
minus discharge) by 20 million
m3 or 40 per cent over a 2015
baseline
On track Our Highvale coal mine in Alberta closed on
Dec. 31, 2021, and reclamation is underway
Achieved Since 2015, we have reduced our fleet-wide
water consumption by 20 million m3 or 43 per
cent
Reduce operational
waste
By 2022, reduce total waste
generation by 80 per cent over a
2019 baseline
Achieved
In 2022, we reduced total waste generation by
1,325,000 tonnes equivalent or 86 per cent
over 2019 levels
Reduce air emissions
Reduce GHG emissions
By 2026, achieve a 95 per cent
reduction of SO2 emissions and
an 80 per cent reduction of NOx
emissions below 2005 levels
By 2026, achieve a 75 per cent
reduction of scope 1 and 2 GHG
emissions from a 2015 base year
By 2050, achieve carbon
neutrality
Achieved Since 2005, we have reduced SO2 emissions by
98 per cent and NOx emissions by 83 per cent
On track
On track
Since 2015, we have reduced GHG emissions
by 68 per cent. In 2022, we reduced
approximately 2.3 million tonnes of CO2e or 18
per cent over 2021 levels
ESG Alignment: Social
Sustainability goal
Sustainability target
Results
Comments
Reduce safety incidents
Achieve a Total Recordable
Injury Frequency rate below 0.61
Achieved
In 2022, we achieved a TRIF of 0.39 compared
to 0.82 in 2021. Our strong safety performance
can be attributed to our focus on maturing our
safety culture, reducing hazards, assessing and
addressing risk tolerance and standardizing
safety information and data collection
technology
Support prosperous
Indigenous communities
Support equal access to all
levels of education for youth and
Indigenous peoples through
financial support and
employment opportunities
Achieved Support in 2022 represented a total value of
$457,000. For the 2021/2022 year, this
included funding for 20 students through our
partnership with Indspire and support for the
Southern Alberta Institute of Technology
academic upgrading program for Indigenous
students
Provide Indigenous cultural
awareness training to all
TransAlta employees by the end
of 2023
On track
In 2022, we provided Indigenous awareness
training to all Canadian employees. Australian
and US employees will receive the training by
the end of 2023
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
ESG Alignment: Governance
Sustainability goal
Sustainability target
Results
Comments
Strengthen gender
equality
Achieve 50 per cent female
representation on the Board by
2030
On track
As of Dec. 31, 2022, women made up 36 per
cent of our total Board composition compared
to 42 per cent in 2021, due to the retirement of
one female Board member
Achieve at least 40 per cent
female employment among all
employees of the Company by
2030
On track
As of Dec. 31, 2022, women made up 26 per
cent of all employees, an increase over 2021
levels (24 per cent)
Maintain equal pay for women in
equivalent roles as men
Achieved
Demonstrate leadership
on ESG reporting within
financial disclosures
Maintain our position as a leader
on integrated ESG disclosure
through increased annual
alignment with leading
sustainability disclosure
frameworks
Achieved
In 2022, we achieved a 99 per cent female/
male pay equity ratio. We reviewed base
compensation levels for non-executive, non-
union employees, comparing female pay to
male pay for employees in comparable
positions
In 2022, we received an 'A-' score with CDP
(the global disclosure system for environmental
impacts known formerly as the Carbon
Disclosure Project). This is higher than the
North America regional average of C and the
thermal power generation sector average of B.
In 2022, TransAlta's MSCI ESG Rating was
upgraded to 'A' from 'BBB'. The upgrade
reflects the Company's strong renewable
energy growth compared to peers
ESG Alignment: Environmental and Social
Sustainability goal
Sustainability target
Results
Comments
Leading clean power
company by 2025
Clean energy solutions
for customers
No further coal generation by
the end of 2025 with 100 per
cent of our owned net
generation capacity to be from
clean electricity (renewables
and gas)
Develop new renewable projects
that support customer
sustainability goals to achieve
both long-term power price
affordability and carbon
reductions
On track
In 2021, we retired or converted all coal plants
in Canada and closed the Highvale coal mine,
thus ceasing all coal generation in Canada. Our
Centralia plant in the US is set to retire on Dec.
31, 2025
On track
In 2022, we have successfully delivered 800
MW of new growth or 40 per cent of
incremental renewable capacity. We are on
track to meet the target of 2 GW by 2025, as
part of our Clean Electricity Growth Plan
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Decarbonizing Our Energy Mix
ESG is more than a business strategy at TransAlta; it is a competitive advantage. Sustainability is one of our
core values; therefore, we strive to integrate climate change into governance, decision-making, risk
management and our day-to-day business operations. The outcome of our climate change focus is
continuous improvement on key climate-related issues and ensuring our economic value creation is balanced
with a value proposition for the environment and people.
We recognize the impact of climate change on society and our business both today and into the future. Our
renewable energy commitment began 111 years ago when we built the first hydro assets in Alberta, which still
operate today. In 1997, we began operating our first wind facility, in 2014, our first solar facility and, in 2020,
our first battery storage facility. Today, we operate over 50 renewable facilities across Canada, the US and
Australia.
Our reporting on climate change management has been guided by the TCFD recommendations since 2018.
This framework helps inform discussion and provide context on how climate change affects our business.
Strategy and Risk Management
Climate Change Strategy
As described in the following sections, our risks and opportunities assessment and climate scenarios analysis
support the development and continuous improvement of our climate change strategy. We actively monitor
and manage climate-related risks and opportunities as part of our overall business strategy to ensure we
remain resilient across all scenarios.
TransAlta remains committed to creating a path to resiliency in a decarbonizing world in support of the goals
adopted under the Paris Agreement, and the goals adopted during subsequent international climate meetings.
Our strategy is focused on the operation of our existing assets (wind, hydro, solar, natural gas, battery
storage and coal), the phase-out of coal-fired electricity generation, and the development of renewable
energy and storage projects. Our customers are increasingly integrating ESG risk into their business
decisions; therefore, we see an advantage in growing our clean power business to support our customers'
sustainability goals. Our investments and growth in renewable energy are highlighted by our portfolio of
renewable energy-generating assets. From 2000 to 2022, we grew our nameplate renewables capacity from
approximately 900 MW to over 2,900 MW. Today, our diversified renewable fleet makes us one of the largest
renewable power producers in North America, one of the largest producers of wind power in Canada and the
largest producer of hydro power in Alberta.
Another way we contribute to our customers’ sustainability goals is through environmental attributes. The
environmental attributes that we generate include carbon offsets, renewable energy credits and emission
offsets. Our customers can use environmental attributes to lower compliance costs attributed to carbon
policies or renewable portfolio standards. Further, environmental attributes can help achieve voluntary
corporate sustainability or carbon reduction goals.
To combat the challenges of renewable energy intermittency, we continue to invest in battery storage. In
2020, we launched WindCharger, a "first of its kind in Alberta" battery storage project that stores energy
produced by our Summerview II wind facility and discharges electricity onto the Alberta grid during system
supply shortages, as well as providing critical system support services to the system operator. Further, in
2021, we agreed to provide solar electricity supported with a battery energy storage system to BHP Nickel
West through the construction of the Northern Goldfields solar project in Western Australia. This project will
support BHP in meeting its emissions reduction targets and delivering lower-carbon, sustainable nickel to its
customers. The Northern Goldfields solar project is on track to be completed in early 2023 and is expected to
reduce BHP's scope 2 electricity GHG emissions by 540,000 tonnes of CO2e over the first 10 years of
operation. In 2022, TransAlta entered into an engineering, procurement and construction agreement for the
expansion of the Mount Keith 132kV transmission system to support the Northern Goldfields solar project.
The expansion will facilitate the connection of additional generating capacity to our network to support BHP's
operations and increase its competitiveness as a supplier of low-carbon nickel.
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
In support of our own path to climate resiliency, we have taken significant steps to reduce our carbon
footprint over the last several years. In 2021, we adopted a more stringent climate-related target to reduce 75
per cent of our scope 1 and 2 GHG emissions by 2026 from a 2015 base year. We estimate that this target is
in line with the latest climate science and the electricity sector decarbonization pathway to limit global
warming to 1.5°C and meet the Paris Agreement goals. Furthermore, we adopted an accelerated long-term
climate-related target to achieve net-zero for 100 per cent of TransAlta’s scope 1 and 2 GHG emissions by
2045. This ambitious target aligns us with the Canadian Net-Zero Emissions Accountability Act to achieve
net-zero emissions by 2050.
We are also taking strategic steps to decarbonize the power sector and support the energy transition. In
2022, we achieved a cumulative progress of 800 MW toward our Clean Electricity Growth Plan announced in
2021. The plan will see the Company execute on 2 GW of renewables growth by 2025 and a 5 GW growth
pipeline by 2025. In 2023, we are targeting final investment decisions on 500 MW of additional clean energy
projects across Canada, the US and Australia. In 2025, we will retire our single remaining coal unit, located in
the US, to complete TransAlta's transition away from coal generation.
To date, we have retired 4,664 MW of coal-fired generation capacity since 2018 while converting 1,659 MW
to natural gas. Comparatively, our converted natural gas units' CO2 intensity is approximately 57 per cent less
than coal generation. Repurposing the facilities rather than decommissioning them reduces the cost and
emissions associated with new construction and aligns with the UN SDGs, specifically "Goal 9: Industry,
Innovation and Infrastructure." The completed conversions and the closure of the Highvale coal mine also
contribute to the goals of the Powering Past Coal Alliance, which TransAlta joined in 2021 at COP26.
We actively engage policymakers and stakeholders on how to facilitate a transition where the electricity
systems we serve can reach net-zero emissions while maintaining reliability. We will continue investing in
renewables and assessing the best options to deliver energy storage, including incorporating learnings from
our industrial-scale battery into our Company strategy and sharing those learnings with government. At the
same time, natural gas will play an essential role in the electricity sector, providing dispatchable generation to
support current system demands and a smooth energy transition. We always seek energy-efficiency
improvements and opportunities to achieve emissions reductions at competitive costs. Further, we are
committed to investing in climate change mitigation solutions to maximize value for our shareholders,
customers, local communities and the environment.
Climate Transition Plan
A climate-related transition plan describes how a company aims to minimize climate-related risks and
increase opportunities, in alignment with the TCFD recommendations. In 2022, TransAlta developed its first
consolidated Climate Transition Plan, which lays out our approach to reducing operational and value chain
emissions to deliver net-zero operations by 2045. In addition, our Climate Transition Plan includes sustainable
finance and inclusive transition actions reflecting TransAlta's commitment to a successful transition toward a
low-carbon economy. For further information, refer to Sustainable Finance in the Decarbonizing Our Energy
Mix section of this MD&A and Inclusive Transition in the Engaging with Our Stakeholders to Create Positive
Relationships section of this MD&A.
Our Climate Transition Plan defines TransAlta's past, short-term (2023-2025) and medium- to long-term
actions (beyond 2026). For each of these actions, we assessed our ability to control ("C") intended outcomes,
partner ("P") with stakeholders to drive outcomes or influence ("I") outcomes that will help us achieve our
decarbonization targets.
The highest level of climate change oversight, including the actions of our Climate Transition Plan, is at the
Board level. For further information, refer to Oversight by the Board of Directors in the Climate Change
Governance section of this MD&A. Information on executive compensation linked to climate-related targets is
described in ESG-Linked Compensation in the Building a Diverse and Inclusive Workforce section of this
MD&A. Metrics and targets supporting our Climate Transition Plan, including climate-related financial metrics,
are described in Climate Change Metrics and Targets in the Decarbonizing Our Energy Mix section of this
MD&A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Delivering Net-Zero Operations by 2045
Hydro
Wind and Solar
Past actions
Short-term actions (2023-2025)
Became the largest producer
of hydro power in Alberta (C)
From 2000 to 2022, we grew
our nameplate renewables
capacity by approximately
2,000 MW (C)
In 2022, announced 200 MW
of new build projects and
100 MW of advanced-stage
wind development projects
(C)
Deliver 2 GW of incremental
renewable capacity with a targeted
capital investment of $3.6 billion by
the end of 2025 (C)
Achieve 70 per cent of EBITDA
from renewables and storage by
the end of 2025 (C)
Accelerate growth in customer-
centred renewable energy
solutions through the deployment
of our 5 GW development pipeline
by the end of 2025 (C)
Battery
Storage
First battery storage facility
delivered in 2020 (C)
Develop up to 180 MW battery
storage in Canada (C)
Medium to long-term
actions (2026 +)
Enable a two-fold increase in
renewables by 2030 (C)
Develop new opportunities
for growth in renewables and
storage by 2030 (C)
Natural Gas
In 2022, started the
construction of a 48 MW
solar and battery storage
system in Australia (C)
Completed our coal-to-gas
conversions in Canada in
2021 (C)
Converted 1,659 MW from
coal to natural gas since
2018 (C)
Emerging
Abatement
Technologies
and Solutions
Started exploring new
technologies such as
storage, hydrogen and
carbon capture (P)
In 2022, supported the
development of low-cost,
low-emissions hydrogen
production through $2
million investment in a
Canadian-based venture (P)
Neutralize residual emissions
from gas-fired generation
through fuel switching, new
technologies or nature-
based solutions (C)
Deploy new net-zero
generation technologies and
solutions where appropriate
(C)
Choose materials, products
and processes that generate
fewer GHG emissions, mainly
through energy savings (C)
Evaluate and deploy battery
storage alongside renewable
facilities where appropriate (C)
Operate simple-cycle, combined-
cycle and cogeneration facilities in
Canada, the United States and
Australia (C)
Assess deployment of nature-
based or engineered solutions to
neutralize unabated gas-fired
generation where appropriate (C)
Evaluate use of renewable and
low-carbon natural gas (C)
Identify the next generation of
power solutions and technologies
and potential for parallel
investments in new complementary
sectors by the end of 2025 (P)
Assess ways to support customers
with broader decarbonization
technologies beyond electrification
(P)
Partner with leading global
companies to target early-stage
revolutionary technologies through
a US$25 million investment in a
deep decarbonization fund (P)
Identify opportunities to partner,
pilot and deploy novel, net-zero
generation technologies (P)
Assess and deploy GHG removal
technologies where appropriate (C)
Energy
Transition
(Coal)
Retired 4,664 MW of coal-
fired generation capacity
since 2018 including ending
coal generation in Canada in
2021 (C)
Closed last coal mine in 2021
(C)
Continue to execute reclamation
work at our coal mines (C)
Cease coal generation by
2026 (C)
Contribute to a circular economy
through mining waste reuse or by-
product sales (C)
Complete full reclamation in
Washington State by 2040
and in Alberta by 2046 (C)
Legend: (C) Control intended outcomes, (P) partner with stakeholders to drive outcomes, and (I) influence outcomes that will help us achieve our
decarbonization targets.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Delivering Net-Zero Operations by 2045 (Continued)
Past actions
Short-term actions (2023-2025)
Supply Chain
Enhanced supplier
management functionality
within the corporate
procurement system (C)
Develop ESG criteria for supply
chain engagement (C)
Understand direct suppliers, GHG
emissions profile and targets (C)
Incorporate ESG data reporting
capability in corporate
procurement system (C)
Medium to long-term
actions (2026 +)
Engage with suppliers to
explore enhancement of their
GHG emissions reduction
targets (I)
Set direction for engaging
suppliers with GHG
emissions reduction targets
(C)
Value Chain
Disclosed range of scope 3
GHG emissions at company
level (C)
Update scope 3 GHG emissions
reporting methodology (C)
Consider scope 3 GHG
emissions targets (C)
Sustainable
Finance
Inclusive
Transition
In 2021, converted existing
$1.3 billion loan into a
Sustainability-Linked Loan
aligned with GHG emissions
reduction and female
employment targets at the
company level (C)
In 2021, secured $173 million
green bond financing for
eligible wind project in
Alberta (C)
In 2022, issued US$400
million Senior Green Bonds
for eligible renewable energy
and energy-efficiency
projects (C)
Linked ESG performance to
employees’ and executive
remuneration (C)
Developed a five-year
Equity, Diversity and
Inclusion (ED&I) strategy (C)
Conducted ED&I census to
help drive a greater sense of
belonging for all employees
across our company (C)
Set organizational health and
ED&I targets as part of ESG-
linked compensation (C)
In 2015, announced
community investment of
US$55 million over 10 years
to support energy efficiency,
economic and community
development and education
and retraining initiatives in
Washington State (P)
In 2016, agreed to invest in
the communities impacted
by the phase-out of coal
generation in Alberta (P)
Verify and disclose 80 per cent of
our total scope 3 emissions (C)
Continue to evaluate the use of
sustainable or green financing
instruments to fund renewable
energy and battery storage
projects (C)
Continue to evaluate the use
of sustainable or green
financing instruments to
grow our renewables and
storage capacity (C)
Link ESG performance to
employees’ and executive
remuneration (C)
Expand number of employee
resource groups available (C)
Adapt workplaces to incorporate
structural changes for inclusive
work environments (C)
Deliver year-round ED&I learning
and awareness, and celebration
campaigns (C)
Continue energy transition
investment in Washington State
communities of up to US$55 million
by 2025 (P)
Continue to invest in the
communities impacted by the
phase-out of coal generation in
Alberta (P)
Strengthen Indigenous relations
focused on community
engagement and consultation,
community investment and
partnership opportunities (P)
Provide Indigenous cultural
awareness training to all
employees by the end of 2023 (C)
Promote supplier diversity in our
operations (C)
Implement employee
resource groups with the
support of ED&I partners (P)
Enhance recruitment and
retention of female
employees to achieve
gender-based targets (C)
Maintain succession
practices to increase female
representation at senior
management level (C)
Increase female
representation in Generation
by encouraging women to
pursue a career in electricity
(C)
Enhance opportunities for
diverse suppliers in our
procurement processes (C)
Continue to enhance our
Indigenous relations focused
on partnership opportunities
with local communities (P)
Ongoing support to local
community organizations
aligned with our community
investment pillars where we
operate and grow
communities (P)
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Climate Change Governance
Climate-related risks and opportunities can significantly impact our business, especially regulatory changes
and shifting customer preferences toward lower-carbon energy. Therefore, we actively manage risks and
opportunities so that we can continue to grow and achieve our goals. Climate-related issues are identified at
every level of management, including the Board, executive team, business units and corporate functions (for
example, government relations, regulatory, emissions trading, sustainability, commercial, customer relations,
investor relations). Ensuring climate-related issues are acknowledged and addressed at the most senior
levels of the Company (including at the Board and executive level) has allowed us to establish actionable
emissions reduction targets and grow our generation capacity through renewable energy and storage.
Oversight by the Board of Directors
The highest level of climate change oversight is at the Board level, with specific oversight of certain aspects
of the Company's response to climate change being delegated to our Governance, Safety and Sustainability
Committee (“GSSC”), our Audit, Finance and Risk Committee ("AFRC") and our Investment Performance
Committee (“IPC”) of the Board.
Meeting quarterly, the GSSC assists the Board in monitoring and assessing compliance with climate change
regulation and reporting. The GSSC receives management reports from the Executive Vice President ("EVP"),
Legal, Commercial and External Affairs on changes in climate-related legislation and the potential impact of
policy developments on TransAlta's business. The GSSC then supports the Board in developing Company-
wide climate change strategies, policies and practices. The GSSC also reviews environmental protection
guidelines, including with respect to GHG mitigation, and considers whether our environmental procedures
are being effectively implemented.
The AFRC and IPC also play a role in managing TransAlta's climate-related risks and opportunities. The AFRC
assists the Board in overseeing the integrity of our consolidated financial statements and ensures climate
risks and opportunities are factored into financial decision-making. Further, the AFRC is responsible for
approving our Commodity and Financial Exposure Management policies and reviewing quarterly ERM
reporting. The IPC considers and assesses risks related to capital investment projects, including overseeing
climate risk assessments and mitigation plans. As a result, climate-related capital expenditures, acquisitions
and budgets are reviewed by the AFRC and IPC on a case-by-case basis.
The Board reviews and updates the Company's strategy annually. In 2022, the Board's strategic planning
sessions included climate-related issues considering growth initiatives and strategies, capital allocation and
other matters. Our Board is composed of individuals with a mix of skills, knowledge and experience critical to
our strategy success and business growth. In 2022, four of our 11 Board members identified environment/
climate change among their top four relevant competencies.
Role of Senior Management
TransAlta’s President and CEO maintains the highest level of oversight on climate-related issues at the
executive level. Our EVP, Legal, Commercial and External Affairs provides the Board, as well as the President
and CEO, with updates on climate-related risks and opportunities to inform business strategy and to ensure
alignment with TransAlta’s GHG emissions reduction goals. Our business units and corporate functions work
closely together to support the executive team in understanding climate-related risks and opportunities. Our
executive team reviews risks and opportunities quarterly and reports to the GSSC and AFRC.
At the business unit level, climate change risks are identified through our Total Safety Management System,
asset management function and systems, energy and trading business, communication with stakeholders,
active monitoring and participation in working groups.
Notably, we tie a component of executive compensation to reducing GHG emissions and climate change
management. We link our annual incentive plans (short-term incentive and long-term incentives) to our
strategic goals. Our strategic goals include growing renewable energy, reducing GHG emissions and
supporting our customers' sustainability goals to decarbonize through on-site low carbon energy generation.
For further information on incentives for ESG performance, refer to the discussion on ESG-Linked
Compensation in Building a Diverse and Inclusive Workforce section of this MD&A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Climate Scenarios
In 2021, we conducted climate scenario analysis to understand risks and opportunities and assess our
strategy's resiliency under several potential future climate scenarios. The analysis utilized scenarios from the
International Energy Agency’s ("IEA") 2020 World Energy Outlook, a large-scale simulation model designed to
replicate how energy markets function. We used three scenarios: Stated Policies (“STEPS”); Sustainable
Development (“SDS”); and Net-Zero Emissions by 2050 (“NZE”).
In STEPS, the energy system has no major additional climate and environmental policies enacted by
government(s). STEPS assumes that carbon pricing continues in Canada while no carbon price is set in the US
or Australia. STEPS also assumes that the power sector reduces emissions by 45 per cent by 2040 while
natural gas generation capacity increases. Finally, STEPS is limited to the deployment of commercial-ready
technologies, including wind and solar.
In SDS, the goals of the Paris Agreement (2015) are achieved, resulting in net-zero emissions by 2070. The
SDS assumes a rapid increase in clean energy policies and investments that position the energy system to
also achieve key UN SDGs. In SDS, all current net-zero pledges are achieved and there are extensive efforts
to reduce emissions. SDS assumes that carbon pricing continues in Canada and is set in the US and Australia.
It also assumes that the power sector reduces emissions by 90 per cent by 2040 while natural gas capacity
remains stable into 2030 and declines toward 2040. Finally, SDS assumes that beyond wind and solar, the
energy system relies on batteries, storage and some level of carbon capture, utilization and storage (“CCUS”)
and hydrogen.
NZE represents a pathway for the global energy sector to achieve net-zero emissions by 2050. This scenario
also assumes key energy-related SDGs are achieved through universal energy access by 2030 and major
improvements in air quality. NZE is built upon the idea that a global increase in electrification supports the
journey to net-zero. It assumes that an aggressive carbon price is set in Canada, the US and Australia. It also
assumes the power sector reaches net-zero emissions by 2035 in advanced economies while natural gas
capacity is stable to 2030 and declines significantly into 2040. Like the SDS, NZE assumes that beyond wind
and solar, the energy system relies on batteries, storage and some level of CCUS and hydrogen.
In 2022, we reviewed the findings from the climate scenario analysis and updated the management response
accordingly.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Key Climate Scenario Findings
Using climate scenarios, we analyzed the resiliency of our business and determined specific risks and
opportunities for our individual assets. All three scenarios present opportunities for TransAlta’s growth related
to renewables, storage solutions and ancillary services. The scenario analysis found that our wind and solar
assets have the highest prospects for growth, which aligns with our growth strategy. Under all scenarios,
hydro remains a valuable asset as it allows for expansion to include storage.
The following sections highlight TransAlta's top risks, opportunities and management response across all
scenarios.
Top Identified Climate-Related Risks by Scenario
Increased competition
Subsidies/funds available for
clean energy transition increase
as governments aim to grow
installed capacity of renewables
to meet rising electricity demand
and compensate for the closure
of carbon-intensive power plants.
In Canada, it is expected that
major grid decarbonization
investments will flow into Alberta
as most other provincial markets
are heavily regulated and/or are
already low carbon. This will
increase competition in the
merchant market, making a large
part of the generating fleet
frequently bid at zero, driving
down the average price of
dispatched electricity.
Simultaneously the cost of
renewables, expected to decline
across all scenarios, decreases
the capital barrier to entry. These
combined factors will increase
competition for TransAlta. The
IEA scenarios do not provide clear
indication of electricity pricing
and how it can be affected by
increased competition. As such,
this remains a point of
uncertainty. Some structural
market changes may be required
to guarantee returns for power
generators and successfully
decarbonize the grid.
By 2040, renewables are
expected to comprise over 85 per
cent of the total electricity
generation in the regions we
operate. This surge in renewables
will increase competition and
drive electricity pricing down
depending on availability and the
cost of energy storage. The
change in electricity prices and
increased market uncertainty are
expected to impact our profits.
Increased operational
costs
Carbon price increases the
cost of natural gas
operations. Additional
mandated emissions
reductions could force
remaining plants to invest
in technologies like CCUS,
increasing the operating
costs for natural gas plants
further. Natural gas assets
in the US and Australia face
less risk compared to
assets in Alberta as they
are contracted and can
pass down carbon costs to
their clients. Current and
anticipated regional carbon
pricing monitoring is
required to plan and assess
increases in operational
costs and impacts on new
projects and investments.
Decreased demand of
natural gas electricity
Demand for power from natural
gas declines as the market shifts
towards cleaner power with gas
shifting to a reliability backstop
role. An additional decline from
Canadian oil and gas customers
can occur as oil production levels
drop under NZE and SDS. The
transition to a lower-carbon world
will likely result in volatility and
market uncertainty.
Counterintuitively, natural gas
power may be necessary to
provide power in the transition if
the pace of decarbonization is
slower than expected in the
scenarios or if grid-scale storage
solutions do not develop/
commercialize as modelled. In
these cases, with coal phased
out, natural gas assets will be
relied on for baseload generation.
This means that natural gas
assets may still play a role for a
smooth and efficient energy
transition. Optimization of natural
gas assets is required, and
additional investments need to be
assessed with caution to consider
the pace of decarbonization and
consequent risk of decreased
demand for natural gas power.
The share of natural gas
electricity generation is expected
to decline over 50 per cent in the
regions in which we operate by
2040 compared to 2019 levels.
This lower demand for natural gas
power is expected to impact our
natural gas assets if no
management responses are
implemented.
Higher operational costs
driven by an increase in
carbon price to US$205/
tonne CO2e by 2040 in all
our operating regions
(advanced economies
under IEA scenarios) and
lower operational capacity
is expected to impact the
profits from our natural gas
assets.
Description
NZE
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Top Identified Climate-Related Risks by Scenario
Increased competition
Fewer subsidies/funds are
expected under this scenario
compared to NZE. However,
renewable costs will still decline
approximately 10 per cent in wind
and 55 per cent in solar by 2040
compared to 2019 levels. This
decline with some level of
subsidy will increase competition
and potentially decrease
electricity prices, which is
expected to impact our profits.
Decreased demand of
natural gas electricity
Natural gas electricity generation
still falls over 50 per cent in North
America while remaining flat in
Australia by 2040 when
compared to 2019 levels. Demand
for natural gas power is expected
to decrease at a slower pace than
under NZE. This could potentially
impact our natural gas assets if
no management responses are
implemented.
Natural gas electricity generation
is expected to increase over 15
per cent in the regions in which
we operate by 2040 compared to
2019 levels. These changes are
not expected to affect our natural
gas assets.
Increased operational
costs
Increase in operational
costs would happen at a
slower rate compared to
NZE but carbon costs are
still expected to reach
US$140/tonne CO2e by
2040 in all of our operating
regions. This could
potentially impact the
operational capacity and
profits from our natural gas
assets, depending on the
ability to pass carbon
prices on through our
contracts.
Operational costs are not
expected to significantly
increase under this
scenario as only Canada
sees a carbon price in
2040. Therefore, profits
from our natural gas assets
are not expected to be
affected.
SDS
STEPS
Management
Response
While minimal subsidies are
expected and the cost of entry
will not decline at the same rate
as SDS or NZE, renewable costs
are still expected to decline
approximately 8 per cent in wind
and 45 per cent in solar by 2040
compared to 2019 levels. This will
still cause an increase in
competition that is expected to
be offset by additional electricity
demand and therefore it is not
expected to impact our profits.
Navigating the uncertainty around
market dynamics (structure,
pricing and competition),
government policies and planning
is critical for TransAlta. We use
hedging and PPAs to stabilize
pricing and are planning on
leading clean energy growth in
the regions in which we operate.
See more details of our strategy
and risk management under the
Climate Strategy section and the
Managing Climate Change Risks
and Opportunities section of this
MD&A.
Optimize gas assets to maximize
value and cash flows to support
renewables and storage growth.
Our converted natural gas units'
CO2 intensity is approximately 57
per cent less than coal
generation. Repurposing the coal
facilities rather than
decommissioning them reduces
the cost and emissions
associated with new construction
and aligns with the UN SDGs,
specifically "Goal 9: Industry,
Innovation and Infrastructure." In
parallel, we continue growing our
renewable fleet; by the end of
2025 we will have achieved a 100
per cent portfolio mix of
renewables and natural gas with
70 per cent of EBITDA attributable
to renewables.
We have taken significant
steps to reduce our carbon
footprint. Since 2015, we
have reduced GHG
emissions by 68 per cent.
By 2026, we have a
commitment to reduce
scope 1 and 2 GHG
emissions by 75 per cent
from 2015 base year and
plan to achieve net-zero
emissions by 2045.
Further, our corporate
functions apply regionally
specific carbon pricing,
both current and
anticipated, as a
mechanism to manage
future risks of uncertainty
in the carbon market.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Top Identified Climate-Related Opportunities by Scenario
Renewables become major energy source
New technology development
Description
NZE
SDS
STEPS
Management
Response
Opportunities to grow the renewable fleet exist
across all scenarios. Renewable assets (hydro,
wind, solar) are expected to become the default
form of generation with demand for power from
these types of assets increasing. Hydro is likely to
grow in value given increased renewables
penetration and the need for reliable zero-emitting
generation. This can make hydroelectric power a
stronger source of baseload electricity in many
regions. The decreasing cost of renewables also
facilitates the growth of a renewable fleet,
especially under NZE and SDS.
A growth of renewable electricity generation of
approximately 950 per cent is expected by 2040
compared to 2019 levels. This results in
renewables comprising more than 85 per cent of
the electricity generation in the regions in which we
operate. The transition of hydro to baseload
capacity is expected to create upside for
TransAlta. An increase in TransAlta’s renewable
capacity and demand are expected to enable
growth and higher revenues.
A growth of renewable electricity generation of
approximately 550 per cent is expected by 2040
compared to 2019 levels. This results in
renewables comprising more than 75 per cent of
the electricity generation in the regions in which we
operate. An increase in TransAlta’s renewable
capacity and demand are expected to enable
growth and higher revenues.
STEPS growth is muted relative to the other
scenarios but still sees a growth of renewables of
280 per cent by 2040 compared to 2019 levels.
This growth will allow approximately 50 per cent of
electricity generation to come from renewables in
areas in which we operate by 2040. An increase in
TransAlta’s renewable capacity and demand are
expected to enable growth and higher revenues.
Our renewable energy commitment began more
than 100 years ago when we built the first hydro
assets in Alberta, which still operate today. We
now operate over 50 renewable facilities across
Canada, the US and Australia. By the end of 2025,
we expect 70 per cent of our EBITDA to be derived
from renewables. Our strategy is focused on the
operation of our existing assets (wind, hydro, solar,
gas, storage and coal) and the development of
renewable energy, storage and low-carbon natural
gas generation. Our investments and growth in
renewable energy are highlighted by our portfolio
of renewable energy-generating assets. From
2000 to 2022, we grew our nameplate renewables
capacity from approximately 900 MW to over
2,900 MW. Today, our diversified renewable fleet
makes us one of the largest renewable producers
in North America, one of the largest producers of
wind power in Canada and the largest producer of
hydro power in Alberta.
Opportunities for development of battery or
hydroelectric storage systems and ancillary
services exist across all scenarios as
renewable energy continues to penetrate the
grid. Developments in these areas are required
to keep electricity flowing when the
renewables in a region are not producing.
Storage is especially anticipated to play an
important role in the energy transition. Cost-
competitive battery storage enables greater
adoption of renewables.
Increased revenues through access to new and
emerging markets are expected to enable
growth and higher revenues under NZE. With
more than 85 per cent of electricity in areas in
which we operate made up of renewables,
there will be big steps forward in storage and
ancillary services technologies. Storage
capacity is expected to grow to approximately
250 GW in the US by 2040.
Increased revenues through access to new and
emerging markets are expected to enable
growth and higher revenues under SDS. A
lower share of renewables than in NZE will
allow swing production to remain present;
however, growth in ancillary and storage
capacity will still be needed to support the
market. Storage capacity is expected to grow
to approximately 110 GW in the US by 2040.
Access to new and emerging markets would be
limited under this scenario compared to NZE
and SDS. While growth in renewables is
expected, the need for new technologies is not
a necessity in this market and may not be
profitable. Therefore, our revenues are not
expected to be affected.
To leverage this opportunity and combat the
challenges of renewable energy intermittency,
we continue to invest in battery storage. In
2020, we launched WindCharger, a "first of its
kind in Alberta" battery storage project that
stores energy produced by our Summerview II
wind facility and discharges electricity onto the
Alberta grid during system supply shortages.
Further, in 2021, we agreed to provide
renewable solar electricity supported with a
battery energy storage system to BHP Nickel
West through the construction of the Northern
Goldfields solar project in Western Australia.
This project will support BHP in meeting its
emissions reduction targets and delivering
lower-carbon, sustainable nickel to its
customers. Construction began in 2022 and is
on track to be completed in early 2023.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
NZE: The most significant risks include increased competition, decreased demand for natural gas and
increased operational costs due to increased carbon pricing and emissions reduction mandates. The most
significant opportunities include a shift toward renewables as the default energy source and new technology
developments, including battery storage systems and ancillary services. It is worth noting that there are
additional risks and opportunities for TransAlta under NZE. For example, changes in how energy market
services are offered could positively or negatively impact our business. Further, as carbon credit policies
evolve, so will our ability to use credits. Lastly, as renewables become the primary energy source, a rethinking
of ancillary services will be necessary but could create significant opportunities for TransAlta.
SDS: The risks and opportunities remain the same under SDS as NZE; however, the impacts are reduced as
market changes are slower and less extreme. Renewables still become the primary electricity source and
there are new technology opportunities, particularly in batteries. Natural gas electricity demand still declines
by 2040. Carbon pricing exists in the US and Australia, but the price is reduced compared to NZE. Lastly, a
reevaluation of ancillary services still presents an opportunity for TransAlta.
STEPS: Under STEPS, renewable generation sees significant growth but does not become the predominant
energy source. Implementing new technologies is much slower and the demand for batteries is reduced. The
demand for natural gas electricity does not decline and there are no large-scale market changes making
services, pricing and ancillary services more stable. This removes the risk associated with natural gas
electricity demand but eliminates the opportunity for growth in ancillary services. Physical risks become more
relevant under this scenario than transitional risks.
To mitigate risks and capitalize on opportunities, we have developed climate signposts to monitor the
evolution of future climate scenarios. Signposts are indicators that suggest the likelihood of a particular
climate scenario. Examples of signposts include directional change in carbon and oil prices. The findings from
the climate scenarios and these signposts work alongside our sustainability metrics and targets to inform the
evolution and resiliency of our Company's strategy and financial planning, risk management, opportunity
assessment and planning for uncertainty.
Managing Climate Change Risks and Opportunities
We actively monitor and manage climate-related risks through our company-wide enterprise risk
management processes. In 2021, we established a formal process to review specific risks using climate
scenario analysis. As previously mentioned, climate change risks and opportunities are addressed at each of
the Board level, executive and management level, business unit level and through our corporate functions.
The business units and corporate functions work closely together and provide information on risks and
opportunities to management, the executive team and the Board.
Climate change risks at the asset or business unit level are identified through our Total Safety Management
System, asset management function and systems, energy and trading business, communication with
stakeholders, active monitoring and participation in working groups. All identified material risks are added to
our ERM register and scored based on likelihood and impact. We do not consider risks in isolation and major
risks are the focus of management response and mitigation plans. Further discussion can be found in the
Governance and Risk Management section of this MD&A.
We divide our climate change risks into two major categories as per guidance from the TCFD: (i) risks related
to the transition to a lower-carbon economy; and (ii) risks related to the physical impacts of climate change.
Transition Risks to a Lower-Carbon Economy
We actively aim to understand and manage the impact of climate change on our business as the world shifts
to a lower-carbon society.
Policy and Legal Risks
Changes in current environmental legislation do have, and will continue to have, an impact upon our
operations and our business in Canada, the US and Australia.
For a more detailed assessment of policy and regulatory risks, refer to the Governance and Risk Management
section of this MD&A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Canada
The Government of Canada has set out ambitious objectives for carbon emissions reduction, including
achieving a 40 to 45 per cent national emissions reduction over 2005 levels by 2030, a net-zero electricity
grid by 2035 and a net-zero national economy by 2050. The Government plans to rely on several policy tools
to achieve its emissions objectives, including carbon pricing, emissions performance regulations, funding for
industrial energy transition, a Clean Fuel Regulation and incentives for consumers.
In 2021, a Supreme Court of Canada decision confirmed the federal government has significant authority to
set national carbon pricing standards. We anticipate the federal government will use this authority to align
provincial carbon pricing systems with national carbon targets. Canada’s provinces have significant
jurisdiction over their respective electricity sectors and play an important role in setting carbon pricing policy
and emissions performance standards, as well as developing and operating their own funding and incentive
programs. Negotiation to align carbon pricing, funding and regulatory standards will likely require significant
effort and create the risk of tension and misalignment between federal and provincial governments.
Risks
•
•
•
•
Escalation in carbon prices and emissions performance regulation may impact TransAlta’s natural gas
generation fleet in Canada as governments escalate policy stringency to meet 2030, 2035 and 2050
targets.
Increased government funding for industrial energy transition may create out of market incentives for
competing generation.
Regulatory incentives, including emissions reduction crediting, may create out of market incentives
for competing generation.
Lack of federal/provincial coordination with respect to climate policy and regulation may lead to
investment uncertainty.
Opportunities
•
Independent estimates suggest that achieving Canada’s climate targets will require a minimum of
twice Canada’s current non-emitting generation. This presents strong policy alignment with
TransAlta’s Clean Electricity Growth Plan. Further, we continue to see strong private sector demand
for contracted zero emissions generation to meet corporate sustainability goals.
• Government funding for innovative technology to reduce emissions from the electricity sector offers
TransAlta the potential opportunity to gain project support for uneconomic new technologies, which
will enable the Company to grow its ESG and policy-aligned generation and energy storage fleet.
• Government support
for
industrial electrification and consumer
electrification, such as for the purchase of electric vehicles, will grow the electricity load over time
and create new opportunities for contracted clean generation.
incentives mandates
for
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Management Response
•
TransAlta’s Clean Electricity Growth Plan positions our company to meet the rapidly growing demand
for clean electricity generation driven by customers and government policy.
• We are focused on developing and acquiring contracted assets that provide long-term certainty with
respect to revenue and eligibility for government incentive programs. TransAlta actively assesses
available government renewable tax legislation and programs to maximize, wherever possible,
access to project incentives.
• Our clean and contracted growth reduces the proportional Company exposure to potential policy and
regulatory decisions that negatively impact natural gas generation.
• Our coal-to-gas facilities fit within government plans to continue providing reliable and competitively
priced electricity for consumers and industry.
• Our remaining natural gas facilities operate under contract, reducing TransAlta’s exposure to changes
in carbon pricing.
•
TransAlta actively engages with the federal and provincial governments in Canada to inform and
influence policy development to ensure that our generating fleet continues to serve our customers as
the country undertakes a broader energy transition.
• We actively work, directly and through industry associations, to encourage governments to adopt a
level playing field within funding and crediting programs so that all new projects receive equitable
government incentives and funding.
•
TransAlta actively engages with all relevant Canadian governments to seek policy alignment across
carbon pricing and regulatory and funding programs to create the greatest possible degree of
investment certainty.
United States
The US Government has set out ambitious objectives for carbon emissions reduction, including achieving a 50
to 52 per cent national emissions reduction over 2005 levels by 2030, a net-zero electricity grid by 2035 and
a net-zero national economy by 2050. The US does not have a national carbon pricing regime but does offer
federal incentives for renewable generation and energy storage.
State and regional climate and market policies have a significant impact on the pace of energy transition in
the US with many governments operating under renewable portfolio standards and carbon pricing regimes.
Similar to Canada, independent estimates suggest that the US will require substantial growth in zero-
emissions generation to meet its national climate targets.
Risks
•
•
TransAlta operates two thermal generating facilities in the US that could be subject to short-term
climate policy changes, but our exposure to this policy risk is low (refer to Management Response
below).
Significant new federal incentives for clean energy could increase competition in the renewables
space.
Opportunities
•
Achieving government climate goals and private sector sustainability commitments will require rapid
and sustained growth in zero-emissions electricity generation over the coming decades. TransAlta’s
Clean Electricity Growth Plan is focused on providing renewable electricity to contracted customers
in a manner aligned with federal, state and private sector goals.
• US tax incentive programs offer significant support for new renewable projects, making the US an
attractive growth market.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Management Response
•
TransAlta’s single coal unit in Washington State is subject to a retirement agreement with the state
government that exempts the facility from carbon pricing prior to its end of life in 2025. TransAlta’s
cogeneration unit at Ada operates under a contract that reduces the Company’s exposure to policy
risk.
• Our Clean Electricity Growth Plan is focused on developing and acquiring contracted assets that
provide long-term certainty with respect to revenue and eligibility for government incentive
programs. TransAlta actively assesses available government renewable tax legislation and programs
to maximize, wherever possible, access to project incentives.
Australia
The Government of Australia has a 43 per cent national emissions reduction target over 2005 levels by 2030
and a goal to achieve a net-zero national economy by 2050. The government is currently considering
changes to the Safeguard Mechanism but these changes are not expected to have a material impact on
TransAlta's assets. Australian state governments have all adopted net-zero goals and a number of states
have interim targets for 2030 and 2040. These state policies are driving demand for zero-emissions
electricity and energy storage.
Risks
•
TransAlta’s Australian natural gas assets may face policy risk related to changes in government
policies but remain well positioned to mitigate those risks (refer to Management Response below).
Opportunities
• Our Clean Electricity Growth Plan is focused on building new, clean generation in Australia and other
markets. Government policies and funding programs are generally supportive of the types of projects
contemplated within TransAlta’s strategy.
•
Strong corporate demand for clean energy solutions in Australia's natural resource sectors present
opportunities for TransAlta to leverage its existing expertise to help customers reach their
decarbonization objectives.
Management Response
•
•
•
Through our Clean Electricity Growth Plan, TransAlta continues to deliver clean energy solutions to
natural resource customers in Western Australia. Our growing suite of technologies, including
renewables and energy storage, positions us to provide contracted solutions to customers focused
on the need for reliable and sustainable energy.
TransAlta also continues to assess opportunities to grow our clean energy generation in alignment
with Australia's national and state climate goals.
TransAlta’s assets are predominantly contracted with an ability to pass through carbon compliance
costs and serve remote industrial load. As a result, the Company faces reduced policy risk.
Technology Risks
Technological changes to support the low-carbon transition present both risks and opportunities for
TransAlta. We evaluate existing and emerging impacts of technology through our Energy Innovation team and
our ERM process. Examples of technology risks and opportunities include infrastructure changes (such as the
shift to distributed energy and away from large-scale power generation infrastructure assets and projects)
and digitization combined with greater adoption of energy efficiency (less use of our end product). Cost-
competitive battery storage will enable greater adoption of renewables and a shift to a distributed power
generation model. We continue to evaluate battery storage for its financial viability while monitoring the
potential impact battery technology could have on natural gas power generation. In 2020, we completed our
first battery storage (10 MW) project at one of our wind facilities in southern Alberta. In 2021, we agreed to
deliver a hybrid system of solar with battery storage (48 MW) in Western Australia. We continue to investigate
the possibility of battery storage at our other facility locations. Our teams continuously adopt improved
technology at each of our new developments, which helps protect our shareholder value and maintain reliable
and affordable electricity delivery.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
We are well-positioned to take advantage of technological opportunities in storage through hydro and/or
battery power. We are also well-positioned to take advantage of advancements in renewable technologies as
we build new facilities. We are actively accelerating our renewable growth strategy, with $3.6 billion in
investment and 2 GW of growth planned by 2025. We will continue monitoring new technologies such as
storage, hydrogen and CCUS for future deployment.
For further information on technology and innovation, refer to the Enabling Innovation and Technology
Adoption section of this MD&A.
Market Risks
Our major market risks are associated with our coal and natural gas assets. Increased costs for natural gas
supply due, in part, to carbon pricing changes could impact our operating costs. We actively monitor market
risks through our energy marketing and asset optimization teams and our ERM process. We manage the
market risks to our coal assets by converting them to natural gas and plan to fully transition off coal by 2025.
Further, our corporate functions apply regionally specific carbon pricing, both current and anticipated, as a
mechanism to manage future risks of uncertainty in the carbon market. To simultaneously manage our risks
and leverage market opportunities, we continue operating our hydro, wind and solar facilities and are
investing in expanding our renewable energy fleet.
We currently have over 20 renewable projects that are either under construction or in the development stage.
We are committed to growing our clean energy fleet and, since 2019, have added over 400 MW of
renewables and storage, including utility-scale battery storage. Further, we established organized Canadian,
US and Australian clean energy growth teams. In 2022, the Company announced 200 MW of new build
projects. TransAlta has established a pipeline of potential growth projects that includes 374 MW of advanced
stage development projects along with 3,891 to 4,991 MW of projects in earlier stages of development. Our
renewable fleet makes our overall portfolio more resilient to climate risk, provides increased flexibility in
generation and creates incremental environmental value through environmental attributes. Lastly, we
recognize the opportunity to grow our ancillary services, such as systems support, providing flexibility to the
decarbonizing grid.
Reputation Risks
Negative reputational impacts, including revenue loss and reduced customer base, are evaluated through our
ERM process. In the past, we experienced negative reputational impacts due to our coal operations, including
a negative impact on the market price of our common shares. Our clear transition path away from coal
mitigates this reputational risk. As consumer trends move in favour of renewable and clean electricity, we are
investing in a diversified mix of renewable generation and optimizing our natural gas fleet. We continue to
actively monitor and manage reputational risks by delivering renewable power solutions while maintaining
competitive costs and reliability.
Physical Risks of Climate Change
As we learn more about the physical risks associated with climate change, we continue to consider acute and
chronic risks that could significantly impact our operations. We continue to investigate the physical impacts of
climate change on our operating assets.
Acute Physical Risks
We have operating assets in three countries and varied geographic locations, many of which could be
impacted by extreme weather events. We continuously evaluate the potential impact of acute climate change
on our business. Our facilities, construction projects and operations are exposed to potential interruption or
loss from environmental disasters (e.g., floods, strong winds, wildfires, ice storms, earthquakes, tornados,
cyclones). A significant climate change event could disrupt our ability to produce or sell power for an
extended period. Therefore, we strive to mitigate future impacts with climate adaptation solutions.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
For example, our gas facility at South Hedland, Australia, is built with climate adaptation in mind. We designed
the facility to withstand a category 5 cyclone (the highest cyclone rating). We have mitigated the risk of
floods that can occur in the area by constructing the facility above normal flood levels. In 2019, a category 4
cyclone hit this facility but did not impact operations. We were able to continue generating electricity through
the storm despite widespread flooding and the shutdown of the nearby port. In Canada, as we near the 10
year anniversary of the 2013 floods in Southern Alberta, we continue to implement projects that increase the
resilience of our hydro facilities to severe climate events. We have also modified operations at several of our
facilities as per an agreement with the Government of Alberta. This reduces flood risk in the spring while also
recognizing the potential for increased droughts as a result of climate change in the future. TransAlta
continues to participate in multi-stakeholder groups developing options for climate resiliency across Southern
Alberta.
For further information on weather-related risks, refer to Weather in the Progressive Environmental
Stewardship section of this MD&A.
Chronic Physical Risks
We continuously investigate the physical impacts of longer-term shifts in climate patterns on our operating
assets and actively integrate climate modelling into our long-term planning. For example, changes to water
flow or wind patterns could impact our hydro and wind businesses and associated revenue generation.
Climate Change Metrics and Targets
Metrics and Targets
At TransAlta, climate change management and performance are a top priority. We established our climate-
related goals and targets with reference to the UN SDGs. Over time, we have set ourselves apart with actions
that demonstrate climate change leadership.
Progress towards our climate-related targets are presented below:
Clean energy growth
Sustainability
Target
Develop new renewable projects that support
our customers' sustainability goals to achieve
both long-term power price affordability and
carbon reductions.
No further coal generation; 100 per cent of our
owned net generation capacity from renewables
and gas.
Year
Progress
2022
2025
Notes
Examples of renewable energy projects in 2022
include the construction of: our Garden Plain
wind project in Alberta, which is subject to a
PPA with Pembina Pipeline (100 MW) and an
investment-grade globally recognized customer
(30 MW); our White Rock wind projects in
Oklahoma (300 MW), which are subject to two
PPAs with Amazon; our Horizon Hill wind project
in Oklahoma (200 MW), which is subject to a
PPA with a subsidiary of Meta; and our Northern
Goldfields solar project with a battery energy
storage system in Western Australia (48 MW),
which is subject to a PPA with BHP.
In 2022, our owned net generation capacity
from renewables and gas represented
approximately 89 per cent of our total 6,246
MW owned net generation capacity. In 2021, we
achieved full phase-out of coal in Canada. In the
US, the remaining unit at Centralia is set to retire
on Dec. 31, 2025.
UN SDG Alignment Target 7.2: "By 2030, increase substantially the
share of renewable energy in the global energy
mix".
Target 7.1: "By 2030, ensure universal access to
affordable, reliable and modern energy
services”.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Emissions reduction
Sustainability
Target
By 2026, achieve a 75 per cent reduction of
scope 1 and 2 GHG emissions from a 2015 base
year.
Achieve carbon neutrality
Year
Progress
2026
2050
Notes
We are well on track to achieve our target of 75
per cent GHG emissions reductions by 2026.
Since 2015, we have reduced GHG emissions by
22 million tonnes of CO2e or 68 per cent.
In 2022, we reduced approximately 2.3 million
tonnes of CO2e or 18 per cent over 2021 levels.
In 2022, we adopted a more ambitious target to
be net-zero by 2045. We believe our Clean
Electricity Growth Plan supports achieving a
more ambitious target.
UN SDG Alignment Target 13.2: "Integrate climate change measures
into national policies, strategies and planning".
Target 13.2: "Integrate climate change measures
into national policies, strategies and planning".
GHG Disclosures
Our GHG emissions are calculated using a number of different methodologies depending on the technologies
available at our facilities. Emissions data has been aligned with the “Setting Organizational Boundaries:
Operational Control” methodology set out in the GHG Protocol: A Corporate Accounting and Reporting
Standard developed by the World Resources Institute and the World Business Council for Sustainable
Development. We report emissions on an operation control basis, which means we report 100 per cent of
emissions at the facilities that we operate.
The GHG Protocol classifies a company’s GHG emissions into three scopes. Scope 1 emissions are direct
emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of
purchased energy. Scope 3 emissions are all indirect emissions (not included in scope 1 or 2) that occur in the
value chain of the reporting company, including both upstream and downstream emissions.
We compile our corporate GHG inventory using our business segment GHG calculations. As a result, emission
factors and global warming potentials used in our GHG calculations can vary due to difference in regional
compliance guidance. The Clean Energy Regulator in Australia amended global warming potentials in August
2020. Therefore, the use of global warming potentials in our GHG calculations related to our Australian assets
differs from the rest of our fleet. Applying harmonized global warming potentials across our fleet would result
in a minor variance to our overall calculated GHG totals.
Our 2022 GHG data was reported to a number of different regulatory bodies throughout the year for regional
compliance and, as a result, may incur minor revisions as we review and report data. Any historical revisions
will be captured and reported in future disclosure. As per the Kyoto Protocol, GHGs include carbon dioxide,
methane, nitrous oxide, sulphur hexafluoride, nitrogen trifluoride, hydrofluorocarbons and perfluorocarbons.
Our exposure is limited to carbon dioxide, methane, nitrous oxide and a small amount of sulphur hexafluoride.
The majority of our estimated GHG emissions result from carbon dioxide emissions from stationary
combustion from coal and natural-gas-powered generation.
The following tables detail our GHG emissions by scope, business segment and country in million tonnes of
CO2e. Some values do not sum to the indicated total due to rounding of tabulated emissions. Zeros (0.0)
indicate truncated values.
Year ended Dec. 31
Scope 1
Scope 2
Total GHG emissions
2022
10.2
0.1
10.2
2021
12.4
0.1
12.5
2020
16.3
0.1
16.4
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Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Corporate and Energy Marketing
Total GHG emissions
MANAGEMENT'S DISCUSSION AND ANALYSIS
2022
2021
2020
0.0
0.0
6.3
4.0
0.0
10.2
0.0
0.0
6.5
6.0
0.0
12.5
0.0
0.0
7.7
8.6
0.0
16.4
Year ended Dec. 31
2022
2021
2020
Australia
Canada
US
Total GHG emissions
0.9
5.2
4.1
10.2
1.0
7.9
3.6
12.5
1.1
9.4
5.9
16.4
In 2022, our GHG emissions (scopes 1 and 2) were 10.2 million tonnes as a result of normal operating
activities. Compared to 2021, this represents a reduction of approximately 18 per cent or 2.3 million tonnes
CO2e. Because we sell the environmental attributes generated from our renewable energy facilities, we do not
subtract this amount from our total emissions, but it should be noted that TransAlta’s customers are reporting
GHG emissions reductions using our renewable energy assets, projects and operations.
GHG emissions are verified to a level of reasonable assurance in locations in which we operate within a
carbon regulatory framework. Any historical revisions to GHG data will be captured and reported in future
disclosure. The majority of our GHG emissions result from carbon dioxide emissions from stationary
combustion from coal and natural-gas-powered generation.
The following table highlights our scope 1 and 2 GHG emissions reductions since 2015 and our targeted
emissions in 2026 (in line with our new GHG target). The actual GHG emissions for the Company in 2026 will
vary from that presented below depending on, among other things, the growth of the Company, including its
on-site generation business.
Year ended Dec. 31
Total GHG emissions (million tonnes CO2e)
2026 (forecast)
8.1
2022
10.2
2015
32.2
Scope 3 Emissions
We estimate our scope 3 emissions in 2022 to be in the range of four million tonnes of CO2e, which is
primarily attributed to our non-operated joint venture interests.
Sustainable Finance
Sustainable finance is the process of taking due account of ESG considerations (e.g., climate change,
biodiversity, human rights) when making investment decisions. Sustainable finance is a key pillar of
TransAlta’s Climate Transition Plan. This means we will utilize pools of capital available to sustainable
economic activities and projects to finance our energy transition towards net-zero operations.
TransAlta deploys green and sustainable financing to build out our renewable energy fleet and advance our
clean energy transformation. This supports our goal to deliver on our customers’ needs for clean electricity.
Since 2020, we have issued $703 million in green bonds and converted our four-year $1.3 billion revolving
credit facility into a sustainability-linked loan.
In November 2022, TransAlta issued US$400 million ($533 million) in Senior Green Bonds, an amount equal to
the net proceeds from the bonds will be used to finance or refinance new and/or existing eligible green
projects. The bonds were issued under TransAlta's Green Bond Framework, which aligns with the Green Bond
Principles published by the International Capital Market Association. For further details, refer to Public
Offering and Pricing of US Senior Green Bonds and release of inaugural Green Bond Framework in the
Significant and Subsequent Events section of this MD&A. In 2021, the Company's indirect wholly owned
subsidiary, Windrise Wind LP, completed a secured green bond offering by way of private placement for
approximately $173 million (face value).
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MANAGEMENT'S DISCUSSION AND ANALYSIS
In 2021, TransAlta converted an existing $1.3 billion syndicated revolving credit facility into a sustainability-
linked loan. The loan aligns the cost of borrowing to the Company's GHG emissions reductions and gender
diversity targets. Sustainability-linked loans are any types of loan instruments and/or contingent facilities
(such as bonding lines, guarantee lines or letters of credit) that incentivize the borrower’s achievement of
ambitious, predetermined sustainability performance objectives.
The summary below shows the carrying value of the issued green bonds and the total facility size of our ESG
financial operations portfolio.
As at Dec. 31 (in millions of Canadian dollars)
Green bonds (1)
Sustainability-linked loans
2022
703
1,250
2021
171
1,250
2020
n/a
n/a
(1) Green bonds are related to Senior Green Bonds issued in 2022 and the Windrise Wind green bond issued in 2021.
Climate-Related Financial Metrics
The results of TransAlta’s 2021 climate-related scenario analysis, aligning with a 1.5°C warmer world, have
shown that opportunities to grow the renewable fleet exist across all scenarios and locations. Our revenue
from renewable energy generation (solar, wind and hydro) in 2022 was $1,014 million (2021 – $731 million) or
29 per cent of our total revenue in 2022.
We continue to execute the Clean Electricity Growth Plan to deliver 2 GW of new generation and a 5 GW
growth pipeline by 2025 by reaching final investment decisions on 500 MW of additional clean energy
projects across Canada, the United States and Australia in 2023. Our growth capital expenditures for
renewable energy generation in 2022 was $666 million (2021 – $326 million).
As part of our Clean Electricity Growth Plan, our goal is to achieve 70 per cent of adjusted EBITDA from
renewables and storage by the end of 2025. In 2022, adjusted EBITDA from renewable energy generation
was $838 million (2021 – $584 million) or 51 per cent of our total adjusted EBITDA. Our renewable fleet makes
our overall portfolio more resilient to climate-related risks, provides increased flexibility in generation and
creates incremental environmental value through environmental attributes. Our revenue in 2022 from
environmental attribute sales was $53 million (2021 – $40 million).
The disclosure of TransAlta's financial metrics related to our climate-related risks and opportunities align with
the TCFD recommendations. A summary of our climate-related financial metrics is presented below.
Year ended Dec. 31 (in millions of Canadian dollars)
Capital expenditures for renewable energy generation (1)
Renewable energy adjusted EBITDA (2)
Environmental attribute sales revenue (3)
Renewable energy adjusted revenue (4)
2022
666
838
53
1,014
2021
2020
326
584
40
731
158
353
25
486
(1) Growth capital expenditures include amounts deployed for growth projects and acquisitions related to renewable energy generation. This
includes the construction of our Windrise wind facility completed in November 2021, the acquisition of North Carolina Solar portfolio in
November 2021, the construction of the Garden Plain wind project, White Rock wind projects, Horizon Hill wind project and Northern
Goldfields solar project as part of our Clean Electricity Growth Plan. This excludes the Mount Keith transmission expansion project.
(2) Adjusted EBITDA from renewable energy generation includes hydro, wind, solar and battery storage facilities. These items are not
defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this
MD&A.
(3) Environmental attribute sales revenue indicates the full amount of hydro, wind and solar environmental credits, without any other
consolidation impacts.
(4) Adjusted revenue from renewable energy generation includes hydro, wind, solar and battery storage facilities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Alignment with TCFD
The table below shows the alignment of our climate change management disclosure with TCFD
recommendations.
Recommended Disclosures
Location
Governance
Describe the board’s oversight of climate-related risks and
opportunities
Oversight by the Board of Directors
Describe management’s role in assessing and managing
climate-related risks and opportunities
Role of Senior Management
Strategy
Describe the climate-related risks and opportunities the
organization has identified over the short, medium and long
term
Key Scenario Findings
Describe the impact of climate-related risks and opportunities
on the organization’s businesses, strategy and financial
planning
Climate Change Strategy, Key Climate Scenario
Findings
Describe the resilience of the organization’s strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario
Risk management
Climate Scenarios, Key Climate Scenario Findings
Describe the organization’s processes for identifying and
assessing climate-related risks
Climate Change Strategy
Describe the organization’s processes for managing climate-
related risks
Managing Climate Change Risks and Opportunities
Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organization’s overall risk management
Metrics and targets
Disclose the metrics used by the organization to assess
climate-related risks and opportunities in line with its strategy
and risk management process
Disclose scope 1, scope 2 and, if appropriate, scope 3
greenhouse gas (GHG) emissions and the related risks
Describe the targets used by the organization to manage
climate-related risks and opportunities and performance
against targets
Enabling Innovation and Technology Adoption
Managing Climate Change Risks and Opportunities
Climate Change Metrics and Targets
Climate Change Metrics and Targets
Climate Change Metrics and Targets
Technology and innovation are an existing and increasing focus at TransAlta. We have long been innovators.
TransAlta has been at the forefront of innovation in the power-generation sector since the early 1900s when
we developed hydro assets. We have been an early adopter and developer of wind technology in Canada and
are now one of the largest wind generators in the country. In 2015, we made our first investment in solar
technology in Massachusetts and, in 2020, we installed the first utility-scale battery in Alberta. We are now
looking to advance a new technology roadmap that aligns with the Clean Electricity Growth Plan. This section
covers manufactured and intellectual capital management as per guidance from the International Integrated
Reporting Framework.
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Our Energy Innovation Team
As part of our Clean Electricity Growth Plan, in 2021, we established an Energy Innovation team to investigate,
prioritize and deploy new net-zero electricity generation technologies that address the four pillars of our
business: affordability, reliability, safety and non-emitting. As we grow our renewables business, the Energy
Innovation team is focused on what we should build next that complements our wind, solar and hydro assets
to deliver reliable, affordable and clean electricity to our customers. At the same time, the Energy Innovation
team is looking at electrification broadly to investigate where potential new, adjacent business opportunities
may exist for TransAlta.
Renewable Energy
Today, we operate 944 MW of hydro energy, 1,906 MW of wind and battery storage, and 143 MW of solar
power. We continue to look for opportunities to develop and operate solar energy.
In 2022, TransAlta executed a long-term renewable energy PPA with a subsidiary of Meta for 100 per cent of
the generation from its 200 MW Horizon Hill wind project located in Oklahoma. Under this agreement, Meta
will receive both renewable electricity and environmental attributes from the Horizon Hill wind project. The
facility will consist of a total of 34 Vestas turbines. Construction commenced in the fall of 2022 with a target
commercial operation date in the second half of 2023.
We also entered into a long-term PPA for the remaining 30 MW from our 130 MW Garden Plain wind project,
to be located in Alberta. We will deliver renewable electricity and environmental attributes to a new
investment-grade globally recognized customer. In 2021, TransAlta entered into a long-term PPA with
Pembina Pipeline for the offtake of 100 MW from our Garden Plain wind project. The project began in 2021
and is expected to achieve its commercial operation date early in 2023.
In 2022, TransAlta identified Amazon as the customer for the 300 MW White Rock wind projects, to be
located in Oklahoma. In 2021, we entered into two long-term PPAs with Amazon for the offtake of 100 per
cent of the generation from the projects. Construction activities started in the fall of 2022 with a target
commercial operation date in the second half of 2023.
In 2021, TransAlta acquired a 122 MW portfolio of operating solar sites located in North Carolina, which
represented a significant expansion of our solar generation. We intend to further expand our solar generation
by actively pursuing solar opportunities in the US and Australian markets. The Company is also focused on
pursuing hybrid integrated power solutions with customers.
In 2021, TransAlta agreed to provide renewable solar electricity supported with a battery energy storage
system to the Goldfields-based operations of BHP Nickel West through the construction of the Northern
Goldfields solar project in Western Australia. The project consists of the 27 MW Mount Keith solar facility, 11
MW Leinster solar farm and 10 MW/5 MWh Leinster Battery Energy Storage System and interconnecting
transmission infrastructure, all of which will be integrated into TransAlta’s 169 MW Southern Cross Energy
North remote network. The Northern Goldfields solar project is expected to reduce BHP’s scope 2 electricity
GHG emissions from its Leinster and Mount Keith operations by 540,000 tonnes of CO2e over the first 10
years of operation. Construction of the project commenced in early 2022 and commercial operations are
targeted in the first half of 2023.
TransAlta is actively advancing its development pipeline. In 2022, the Company announced 200 MW of new
build projects. TransAlta has established a pipeline of potential growth projects that includes 374 MW of
advanced stage development projects along with 3,891 to 4,991 MW of projects in earlier stages of
development.
Scaling Up Energy Solutions
Battery Storage
We continue to invest in battery storage. In 2020, we commissioned WindCharger, the first utility-scale
battery storage project in Alberta, located at our Summerview II wind facility. The project uses Tesla battery
technology and has a capacity of 10 MW.
The Northern Goldfields solar project in Western Australia will provide both renewable solar electricity and a
battery energy storage. The energy storage consists of the 10 MW/5 MWh Leinster Battery Energy Storage
System which will be integrated into TransAlta’s remote network. The network and new generation will
support BHP Nickel West to meet its emissions reduction targets and deliver lower-carbon, sustainable nickel
to its customers.
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Future Solutions
Hydrogen
In February 2022, we announced a $2 million equity investment in Ekona’s Series A funding round. The
investment will help support the commercialization of Ekona’s novel methane pyrolysis technology platform,
which produces cleaner and lower-cost turquoise hydrogen. If successful, Ekona’s distributed technology
allows for onsite production of hydrogen, avoiding the need for costly transportation of hydrogen, and its
solid carbon byproduct allows for low-cost, low-emissions hydrogen production without the need for carbon
sequestration. TransAlta is a member of Ekona’s Strategic Committee and will continue to work with Ekona as
it develops its pyrolysis technology.
Nature-based Solutions (NBS)
Nature-based Solutions are actions to protect, sustainably manage and restore natural and modified
ecosystems that address societal challenges effectively and adaptively, simultaneously benefiting people and
nature. TransAlta is actively evaluating NBS as carbon removals to neutralize any limited emissions that we
cannot yet eliminate.
Direct Air Capture (DAC)
Direct air capture (DAC) technologies extract CO2 directly from the atmosphere. The CO2 can be permanently
stored in deep geological formations, thereby achieving permanent CO2 removal. TransAlta continues to
explore the benefits of DAC as a carbon dioxide removal option to support the net-zero transition of our
operations and customers.
Carbon Capture, Utilization and Storage (CCUS)
Our teams continuously explore the use of applied or new technologies such as CCUS to reduce GHG
emissions. We know that new technologies will emerge over the next number of years as the industry
continues to drive towards lower emissions while maintaining a reliable and affordable product for customers.
Disruptive Technologies
In May 2022, we entered into a commitment to invest US$25 million over the next four years in Energy Impact
Partners' ("EIP") Deep Decarbonization Frontier Fund 1 (the “Frontier Fund”) that will invest in early-stage,
innovative technology companies that will accelerate the transition to net-zero GHG emissions. TransAlta's
investment in the Frontier Fund provides TransAlta with the opportunity to pool funds with some of the
largest utilities in the United States and Europe to identify, pilot, commercialize and bring to market
technologies that will support its decarbonization goals. For more information, refer to Energy Impact Partners
("EIP") Investment in the Significant and Subsequent Events section of this MD&A.
Fusion
Fusion technologies attempt to recreate the fusion reactions in the sun by fusing two hydrogen molecules
together. If successful, fusion promises low-cost energy, with far shorter-lived nuclear waste. Fusion
achieved some significant development milestones in 2022, including most significantly, Lawrence Livermore
National Laboratory achieving net energy gain. This, coupled with unprecedented capital flow into fusion
companies, has led to newfound excitement that fusion may be able to leapfrog current generation
technologies.
Through EIP, TransAlta has developed a partnership with ZAP Energy, a leading fusion start up. ZAP Energy’s
technology stabilizes the hydrogen plasma using sheared flow (driving current through the flow creating the
magnetic field confining and compressing the plasma) rather than magnetic fields. In September 2022, ZAP
announced it will conduct a feasibility study of retrofitting the former TransAlta Big Hanaford gas plant
located in Centralia to host its first-of-a-kind Z-pinch fusion pilot plant. ZAP received $1 million from the
Centralia Coal Transition Grants Energy Technology Board as part of our energy transition investments to
move away from coal in Washington State.
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Idea Generation and Innovation
Idea Generation
Our Rise (formerly known as the "Greenlight") program continues to be a driving force behind the strong
culture of idea generation and problem solving at TransAlta. The program emphasizes bottom-up innovation,
which means business improvement ideas are generated by employees. These ideas are developed and
advanced into business cases, adhering to best practices of project management, to ensure successful
implementation of the improvement opportunity. From the initial ideation, to development and delivery, this
process is driven entirely by employees, with support from leaders across the organization.
Supplier Innovation
Another initiative we promote is the TransAlta Innovation Series. The series aims to empower our workforce
through relevant industry knowledge on innovative concepts. This includes bringing in thought leaders on
new technologies to discuss conceptual ideas that initiate creative thinking and suppliers that provide insight
into commercial applications of evolving technologies. The series continually advocates TransAlta’s value and
organizational culture of innovation and learning. The series focuses on informing our employees on the
different kinds of innovative concepts and technologies developing in our industry that they can bring
forward in the organization, while also developing relationships with leading-edge companies. In 2022, the
series also sponsored several charities that have either benefited from the technologies being discussed or
are charities the speaker’s support on behalf of their organization’s ESG and ED&I initiatives.
In 2022, we delivered eight sessions across four different categories, including energy innovation, operational
innovation, digital innovation and innovation mindset. Under energy innovation, we looked at the evolution of
ESG going from a functional requirement a few years ago to currently becoming a core value driver in
corporations. We learned about the up-and-coming role that nuclear small modular reactors will play
nationally and internationally. We also had one of our customers participate in a fireside chat to discuss how
the partnership with TransAlta is providing clean power solutions and impacting the clean energy transition.
Under operational innovation, we discussed what the future of meetings will look like in a hybrid workplace
and the importance of a customer-centric shared services’ business model. Our digital innovation
presentations looked at safety and health apps for our frontline workers and how geospatial intelligence could
be used to optimize and transform the utilities industry. Finally, the presentation focusing on developing an
innovation mindset looked at the periodic table of innovation where all innovation is categorized into 10 main
types and how we can use these as tools to further our own creativity.
Analytics and Automation
Asset Analytics and Optimization
TransAlta's Asset Analytics and Optimization (“AAO”) team was founded in 2008. This team monitors coal-
fired steam, gas-fired steam, simple-cycle, combined-cycle/cogeneration and wind-generating assets across
Canada, the US and Australia. A centralized team of engineers and operations specialists remotely monitors
our power facilities for emerging equipment reliability and performance issues. The AAO team also performs
production reporting functions for these assets and is actively engaged in projects to improve this reporting.
AAO staff are trained in the development and use of specialized equipment monitoring and performance
assessment software and they apply their experience to power facility operations. If an issue is detected, the
AAO will initially assess and then notify facility operations of their findings to support investigation and
remedy of the issue before there is an impact to operations. This support is critical for reliability and
performance of our operations. For example, if a wind turbine starts to show very early signs of equipment
change compared to others, our operation team is notified and will work to investigate and remedy the issue.
The monitoring, analysis and diagnostics completed by the AAO are focused on early identification of
equipment issues based on longer-term trend analysis and complements day-to-day facility operations.
Automation and Robotics
TransAlta created the Data and Innovation team in 2019 to modernize its data infrastructure and take
advantage of new opportunities in analytics and data science. The Data and Innovation team is cross-
functional; composed of data architects, data engineers, data analysts, software developers, integration
specialists and engineers. The team focuses on the delivery of value using digital innovation, such as the
modernization of data management strategy and platforms, the rapid delivery of data-driven applications, the
design and implementation of advanced analytics and machine learning models and the execution of robotic
process automation to eliminate manual tasks.
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A few highlights from this work in 2022 include:
•
•
The Data and Innovation team worked with partners across the company to advance its Asset
Performance Management platform, GenOS, to deliver new features that increase the performance
and management of our renewable asset fleet. Key process improvements, such as enhanced
performance analytics that leverage machine learning, advanced analytics and data science models,
provide our operators with deeper insights to help optimize asset performance across the entire
fleet. Built in-house, GenOS provides data-driven insights for our wind, solar, gas and hydro fleets.
The substantial growth of our Advanced Automation Program has increased the number of manual
processes we have automated, allowing our subject matter experts to spend more time on higher-
value opportunities. With industry leaders in automation, TransAlta is able to leverage high impact
technology to quickly develop custom robotic process automations across the company.
• Continued engagement and Industry partnership with AltaML Applied AI Lab, a groundbreaking
initiative that focuses on building and expanding local talent while improving our business through
the application of machine learning and artificial intelligence. The 2022 cohort worked on six cases
including component health monitoring for our wind and solar fleet forecasting models.
• With a focus on the future, the Data and Innovation team kicked off the Digital TransAlta Program to
identify and plan for the core business capabilities required to respond to a changing industry and
technology landscape over the next five years. This program looks to match digital innovation with
key areas of opportunity across our Operations, Growth, Corporate and Trading teams. In 2022, we
delivered ideation sessions across the company and with industry partners.
Drones
In April 2022, TransAlta formed the Robotics Inspection Council. The Council's purpose is to coordinate and
assess the use of drones for robotic inspections to increase value to the business through improved safety,
reduced inspection costs and better communication. In alignment with TransAlta’s core value of safety, the
Council defined the corporate requirements on the safe use of remotely piloted aircraft in TransAlta's fleet.
The Council also met with vendors and industry peers to understand areas of opportunity and how these
technologies are being deployed. Robotic inspections were performed in TransAlta’s gas and hydro fleets.
The Council is investigating additional applications in our renewable fleet for 2023.
Engaging with Our Stakeholders to Create Positive Relationships
We strive to create shared value for our stakeholders through social and relationship value creation at
TransAlta. The most material impacts on our social and relationship performance are fostering positive
relationships with Indigenous neighbours, communities, stakeholders, governments, industry and landowners
in the areas where we operate, as well as public health and safety. This section covers sustainability factors
of social and relationship capital and intellectual capital as per guidance from the International Integrated
Reporting Framework.
Inclusive Transition
In support of our energy transition, since 2015, TransAlta has been investing US$55 million over 10 years to
support energy efficiency, economic and community development and education and retraining initiatives in
Washington State. The investment is part of the TransAlta Energy Transition Bill passed in 2011. This bill was a
historic agreement between policymakers, environmentalists, labour leaders and TransAlta to transition away
from coal in Washington State by closing the Centralia facility’s two units, one in 2020 and the other in 2025.
Three funding boards were formed to invest the US$55 million: the Weatherization Board (US$10 million), the
Economic and Community Development Board (US$20 million), and the Energy Technology Board (US$25
million). To date, the Weatherization Board has invested US$9.5 million, the Economic and Community
Development Board US$15 million and the Energy Technology Board US$15 million.
Specific projects that the boards funded in 2022 include a grant to Twin Transit in support of the installation
of Southwest Washington’s first Containerized Green Hydrogen Electrolyzer at the Port of Chehalis, providing
a reliable source of local hydrogen and proximity to the market; financial support to the Formic Liquid
Hydrogen Carrier Clean Energy Demonstration Project at the Port of Tacoma and other locations in the state
of Washington, an initiative to replace the use of fossil fuels in the refrigeration of cargo containers; and
funding to support solar systems for organizations and non-profits in Washington.
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Additionally, in 2016, TransAlta announced that we had reached an agreement with the Government of
Alberta for the cessation of coal-fired emissions from coal-fired electricity generation facilities in Alberta (Off-
Coal Agreement). As part of the Off-Coal Agreement, TransAlta has invested in programs and initiatives to
support the communities surrounding the plants negatively impacted by the phase-out of coal generation
during the transition.
Customers
TransAlta serves industrial and commercial customers with power and energy services across its fleet in
Canada, the US and Australia. We are focused on customer-centred renewables growth to bring high levels of
service quality and reliability for our customers in a low-carbon future. As one of the largest electricity
generators in Canada, our team serves businesses with:
•
•
Sustainable solutions starting from the design phase;
Energy consumption and cost management solutions;
• Market price risk and volume exposure mitigation; and
• Monitoring of energy market design changes, price signals and applicable and available incentives.
The Customer Solutions team at TransAlta has maintained a large portfolio of customers in Alberta across a
broad range of industry segments, including commercial real estate, municipal, manufacturing, industrial,
hospitality, finance and oil and gas. Our work has been recognized by our customers through an average
retention rate of 88 per cent over the last three years.
Across our business in Canada, the US and Australia, we provide on-site generation for large mining and
industrial customers. This requires us to be continually engaged with these customers, ensuring that current
electricity requirements are provided safely, reliably and cost-effectively with the benefit of lower GHG
emissions. We continue to explore opportunities to provide 24/7 carbon-free energy to help customers meet
their decarbonization goals.
We continue to develop renewable energy facilities to support customers achieving their sustainability goals
and targets, such as 100 per cent renewable power targets and/or GHG emissions reduction targets.
Production from renewable electricity in 2022 resulted in the avoidance of approximately 2.7 million tonnes of
CO2e for our customers.
Our experience in developing and operating low-carbon power facilities is highlighted below:
Power generation type
Operating experience (years)
Hydro
Natural Gas
Wind
Solar
Battery Energy Storage Systems
111
72
25
8
2
For further details on how we support our customers' sustainability objectives, please refer to the Enabling
Innovation and Technology Adoption section of this MD&A.
Human Rights
TransAlta is committed to honouring domestic and internationally accepted labour standards and supports
the protection of human rights of all its employees, contractors, suppliers, partners, Indigenous partners and
other stakeholders. We abide by human rights and modern slavery legislation in Canada, the US and Australia.
We have a zero tolerance approach to discrimination based on age, disability, gender, race, religion, colour,
national origin, political affiliation or veteran’s status or any other prohibited ground as defined by human
rights legislation in the jurisdictions in which we operate. We afford equal opportunities for men and women,
support the right to freedom of association and the right to organize unions and bargain collectively. We do
not conduct operational human rights reviews or impact assessments, but we do have governance practices
in place for the protection of human rights.
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Our Human Rights and Discrimination Policy communicates our commitment to human rights in our operations
and supply chain to ensure that our personnel policies and practices in our global operations respect
fundamental rights. Expected behaviours of all our employees are set out in our Corporate Code of Conduct.
We are committed to creating a work environment where all workers feel safe and are valued for the diversity
they bring to our business. Our annual mandatory Code of Conduct training is required for employees to
complete before signing the Code of Conduct. We also have adopted a Supplier Code of Conduct that defines
the principles and standards expected of suppliers, their employees and contractors to meet while providing
goods and/or services to TransAlta.
Our Whistleblower Policy provides a mechanism for our employees, officers, directors and contractors to
report, among other things, any actual or suspected ethical or legal violations. We would seek to remedy the
impact promptly in order to establish a corrective action plan in collaboration with the relevant individuals and
stakeholders.
In Australia, we report under the Australian modern slavery legislation. Our Modern Slavery Act Statements
demonstrate the actions we have taken to assess and address modern slavery risks within our operations and
supply chain. These annual statements are approved by our Board of Directors and are publicly available.
Supply Chain and Sustainable Sourcing
We continue to seek solutions to advance supply chain sustainability. As we explore major projects, we
assess vendors both at the evaluation stage and as part of information requests on such elements as safe
work practices, environmental practices and Indigenous spend. This means, for example and for select
procurement engagements, getting information on:
•
•
Estimated value of services that will be procured though local Indigenous businesses;
Estimated number of local Indigenous persons that will be employed;
• Understanding overall community spend and engagement; and
• Understanding the state of community relations through interview processes and stakeholder work.
Supply chain is a pillar of our Clean Electricity Growth Plan to deliver net-zero operations. We have enhanced
the supplier management functionality within our corporate procurement system and are working to
incorporate ESG data reporting capability. In the next few years, we will develop ESG criteria for supply chain
engagement and work to understand our direct suppliers' GHG emissions profile and targets. Our long-term
plan is to engage with suppliers to explore enhancement of their GHG emissions targets and set direction for
engaging suppliers with GHG emissions reduction targets.
In 2022, TransAlta approved a new goal to integrate sustainability into supply chain. Our target is "By 2024,
80 per cent of our spend will be with suppliers that have a sustainability policy or commitment". This supports
the intent of the UN SDG Target 12.7: “Promote public procurement practices that are sustainable, in
accordance with national policies and priorities.”
Our Supplier Code of Conduct applies to all vendors and suppliers of TransAlta. Under this code, suppliers of
goods and services to TransAlta are required to adhere to our core values, including as they pertain to health
and safety, ethical business conduct and environmental leadership. The code also allows suppliers to report
ethical or legal concerns via TransAlta’s Ethics Helpline.
Indigenous Relationships and Partnerships
At TransAlta, we value relationships and partnerships with our Indigenous neighbours, aspiring to the highest
standards in our relationships with Indigenous peoples. Our core values of safety, innovation, sustainability,
respect and integrity represent how we do business and engage with Indigenous peoples. Our commitment to
Indigenous relations is led by a centralized corporate team who foster a relationship-based approach,
involving employees at our facilities and within each business unit. These employees and teams build
relationships with the neighbouring Indigenous communities and work to develop respectful, trusting
relationships that help TransAlta continually improve its business practices.
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Our Indigenous Relations Policy focuses on five key areas: community engagement and consultation,
business development, community investment, employment, and training and awareness. We ensure that
TransAlta’s principles for engagement are upheld and the Company fulfils its commitments to Indigenous
communities. Efforts are focused on building and maintaining solid relationships and strong communication
channels that enable TransAlta to: share information regarding operations and growth initiatives; gather
feedback to inform project planning; and understand priorities and interests from communities to better
address concerns and unlock opportunities.
Methods of engagement include:
•
Relationship building through regular communication and meetings with representatives at various
levels within Indigenous communities and organizations;
• Hosting company-community activities to share both business information and cultural knowledge;
• Maintaining consistent communications with each community and following appropriate community
protocols and procedures;
•
•
Participating in community events such as pow wows and blessing ceremonies; and
Providing both monetary and in-kind sponsorships for community initiatives.
TransAlta takes a proactive approach in engagement by initiating communication early in project development
to allow concerns to be identified and addressed, which has minimized potential project delays. We strive to
maintain relationships through the life cycle of our operations, from project development and construction,
through operation, until decommissioning phases are complete. We work with communities to build
relationships based on a foundation of ongoing communication and mutual respect. This is recognized in our
Indigenous Relations Policy, which was recently updated to include our acknowledgement and understanding
of the intent of the recommendations of the United Nations Declaration on the Rights of Indigenous Peoples.
Support for Indigenous Youth, Education and Employment
TransAlta recognizes the importance of investing in Indigenous students and our financial support helps
students complete their education, become self-sufficient and move forward to become future leaders in
their communities. We are keen to help young Indigenous students reach their full potential and achieve their
dreams. We also believe in providing support to Indigenous primary school students, helping to instil a
passion for lifelong learning.
In 2022, TransAlta provided more than $457,000 to support Indigenous youth, education and employment
programs, representing 20 per cent of TransAlta’s total community investment. Highlights include:
• Mother Earth's Children's Charter School ("MECCS") – Located in Treaty 6 territory, Alberta, MECCS
offers education for students from kindergarten to Grade 9 and is cited as Canada’s first and only
Indigenous children’s charter school. The student population is diverse and includes Métis, Cree,
Nakoda Sioux and Stoney. Volunteers from TransAlta travel to the school to deliver Christmas gifts,
providing both our employees and the students the opportunity to engage with each other.
•
•
•
Spirit North – TransAlta is proud to support Spirit North, a national charitable organization that uses
land-based activities to improve the health and well-being of Indigenous youth. Through the
transformative power of sport and play, participants learn important lessons, discover untold
potential and build the confidence and courage needed to overcome the hardships Indigenous youth
often face.
The Read On Literacy Program – In 2022, TransAlta supported the development of an Indigenous
literacy program that seeks to mentor young people in First Nation schools to achieve their maximum
academic, personal and social development by promoting the core values of education, literacy,
taking pride in ones’ culture and making good decisions in one’s life. TransAlta has sponsored the
Read On Literacy Program to provide this initiative to elementary students in Alberta in 2023.
Books In Homes – Funding supports an early literacy program for the children of Tjiwarl Aboriginal
Corporation members in Western Australia.
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Indigenous Cultural Awareness Training for TransAlta Employees
In 2021, we adopted a new sustainability target that will see all employees complete Indigenous cultural
awareness training by the end of 2023. We believe education is the foundation to ensuring respectful and
strong relationships with Indigenous peoples into the future. In 2022, 100 per cent of Canadian employees
have completed Indigenous cultural awareness training. Our employees in the US and Australia will receive
the training in 2023.
Stakeholder Relationships
Fostering positive relationships with our stakeholders is important to TransAlta. Driven by our core values, we
see stakeholder transparency as an integral part of our relationships. We take a proactive approach to
building relationships and understanding the impacts our business and operations may have on local
stakeholders.
Our Stakeholders
To act in the best interests of the Company and optimize the balance between financial, environmental and
social values for both our stakeholders and TransAlta, we seek to:
•
Build relationships through regular engagement with stakeholders regarding our operations, growth
prospects and future developments;
• Consider feedback and make changes to project designs and plans to resolve and/or accommodate
concerns expressed by our stakeholders; and
•
Respond in a timely and professional manner to stakeholder inquiries and concerns and work
diligently to resolve issues or complaints.
Our stakeholders are identified through stakeholder mapping exercises and prospective project development
or acquisition. Through decades of establishing stakeholder relationships in the areas of our facilities, we
have developed a strong knowledge of who our stakeholders are and gained understanding of our
stakeholders' issues and concerns.
Our principal stakeholder groups are listed in the following table.
TransAlta stakeholders
Non-governmental organizations
Community associations and
organizations
Connecting transmission facility
operators
Regulators
Industry organizations
Charitable organizations/Non-profit
Standards organizations
All levels of government
Media
Communities
Retirees
Residents/Landowners
Investor organizations
Suppliers
Contractors
Business partners
Unions/Labour organizations
Financial institutions
Government agencies
Forest associations/Industry
Mineral rights owners
System operators
Oil and gas associations/Industry
Railroad owners
Customers
Municipalities
Think tanks
Academics
Utility owners
Employees
Stakeholder Engagement
In order to run our business successfully, we maintain open communication channels with our stakeholders.
We are committed to timely and professional resolution in our dialogue with stakeholders. Our stakeholder
engagement practices are guided by regulatory requirements, industry best practices, international standards
and corporate policies. We work internally and with each stakeholder to identify and mitigate further issues.
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Examples of our methods of engagement are listed in the following table.
Information and communication
Dialogue and consultation
Relationship building
Open houses, town halls and public
information sessions
In-person meetings with local groups
and communities
Community advisory bodies
Newsletters, telephone conversations,
emails and letters
Meetings with individual stakeholders
(e.g., landowners and residents)
Capacity agreements
Websites
Targeted audience sessions
Sponsorships and donations
Social media postings
Tours of our facilities and sites
Hosting and attending events
A key focus of our work is to support business growth through proactive engagement with stakeholders in our
geographic operating areas in Canada, the US and Australia to develop and maintain relationships, assess
needs and fit and seek out collaborative and sustainable opportunities. This helps ensure any stakeholder
concerns are identified and can be addressed early in the development process, thereby minimizing project
delays. We conduct consultation primarily during project development and construction and maintain
engaged communication throughout operations to decommissioning.
Examples of stakeholder engagement in 2022 include: the WaterCharger battery energy storage project
virtual open house, Highvale Mine decommissioning and reclamation plan public open house, Tempest wind
project public open house, virtual stakeholder meeting on the Bow River management with local stakeholders
and recreational users and the Kent Hills rehabilitation plan.
Community Investments
In 2022, TransAlta contributed approximately $2.3 million in donations and sponsorships (2021 – $3.0 million),
with a continued focus in three priority areas: youth and education, environmental leadership and community
health and wellness.
One of our significant community investments each year is to United Way campaigns across Canada and the
US. This year, TransAlta employees, retirees, contractors and the Company raised over $1.2 million for the
United Way. TransAlta has been supporting the United Way for over 30 years and has contributed more than
$22 million over that time.
In 2022, TransAlta made a number of other significant investments, including the following highlights:
• Calgary Health Foundation - In 2022, TransAlta announced a $2 million contribution to the Calgary
Health Foundation to support the Newborn Needs campaign in support of the development of a new
Foothills Medical Centre Neonatal Intensive Care Unit, serving all of southern Alberta.
•
Foodbank Support – In December 2022, TransAlta donated $250,000 to local food banks near our
operating assets in Canada, the US and Australia. This initiative recognizes the hardship faced in
many communities and the increased reliance on food banks as families struggle to make ends meet.
• Centralia College - TransAlta (through the Centralia Coal Transition Board) invested $1.3 million in
the Southwest Washington Flexible Training Center, located at the Centralia College campus. The
center is a 12,000 square foot facility that will expand the college’s ability to train-on-demand in
response to and in anticipation of industry needs.
Public Health and Safety
We are committed to protecting the public and our assets, as well as the physical, psychological and social
well-being of our employees.
We specifically look to minimize the following risks:
• Harm to people;
• Damage to property;
• Operational liability; and
•
Loss of organizational reputation and integrity.
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We work to prevent incidents and lower our risk by administering security controls such as restricting physical
access around and into our operating facilities. The use of security technology such as surveillance cameras
and electronic access is utilized to ensure the control of secure areas. Regular audits and security risk
assessments are conducted to ensure continuous improvement of the Security Management Program. Our
Security Management Program is focused on the protection of people, property, information and reputation.
The Corporate Emergency Management Program prepares employees should an emergency incident occur.
The program receives executive sponsorship and includes an emergency management policy and standard,
which sets an expectation for employees to continuously prepare for emergencies. It provides the
overarching framework for each business unit to provide an Emergency Response Plan and Business
Continuity Plan. We implement our Incident Command System, which is a standardized on-scene emergency
and incident management system that provides an organizational structure able to respond to single or
multiple incidents. Designed to aid in the management of resources during incidents, it combines facilities,
equipment, personnel, procedures and communications operating within a common organizational structure.
It is used as part of an all-hazards approach for incident management and is officially recognized for multi-
agency response in emergency situations, however complex.
We develop strong relationships with local emergency responders. We periodically conduct multi-agency
training events at our facilities. This ensures continuous improvement and familiarity with our assets and
builds strong communication channels for emergency response.
Our processes designate how we communicate with stakeholders in the event of a crisis. This is managed by
our Crisis Communications Team. The team has the responsibility and goal to provide a unified message on
behalf of the Company throughout the response and recovery, ensure all messaging is approved by the
Incident Commander, co-ordinate messaging with any applicable external agencies and, if necessary, deploy
to an incident site.
Annual training requirements are adhered to by our employees operating at our facilities. The results are
tracked, audited and presented at our annual executive review. The findings and recommendations assist in
maintaining a sustainable program across the organization.
Data and Digital Asset Protection
We work diligently to protect our digital assets, including our corporate data and our digital identities that give
us access into line of business applications. Cybersecurity risks that work to compromise these assets
include the manipulation of data integrity, system and network hacking, use of social engineering tactics
through email phishing, compromise of operations and infrastructure through the use of ransomware,
credential breaches, attacks introduced through unknowing third-party vendors and service providers, as a
well as malware.
Given the ever-evolving nature of cyberattacks, we are consistently adapting our cybersecurity program to
focus on three key pillars: technology, processes and people. Each of these pillars can be reinforced
independently to address specific cyber risks and threats through a comprehensive and multi-faceted
program. TransAlta continually implements measures and controls to proactively mitigate internal and
external cybersecurity risks and threats posed to the organization and to deal efficiently and effectively with
threats through this program.
TransAlta complies with the North American Electric Reliability Corporation Critical Infrastructure Protection
("NERC CIP") requirements. The NERC CIP is a set of standards aimed at regulating, enforcing, monitoring and
managing the security of the North American power system. These standards apply specifically to
cybersecurity risks.
Refer to Cybersecurity Risk in the Governance and Risk Management section of this MD&A for further details.
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Building a Diverse and Inclusive Workforce
Engaging our workforce, developing our employees, creating a diverse and inclusive work environment and
minimizing safety incidents are the keys to human capital value creation at TransAlta and our most material
areas for management. In 2022, we improved our ESG performance through our efforts to promote an
equitable, diverse and inclusive workforce. This section covers sustainability factors of human capital as per
guidance from the International Integrated Reporting Framework.
Equity, Diversity and Inclusion
TransAlta’s commitment and focus on excellence in ED&I is found in our workplace, among our co-workers
who advocate for the values of equity and inclusion at all working levels. This commitment is outlined in our
Board and Workforce Diversity Policy and Diversity and Inclusion Pledge. We believe a strong focus on ED&I
will create a culture of belonging, allowing our employees to bring their authentic selves to work where they
can thrive, innovate, improve service to our customers and positively impact the communities that we live in.
In 2022, TransAlta executed the second year of our five-year ED&I strategy to achieve the goals and
aspirations defined in our ED&I Pledge.
Gender Diversity
A number of case studies have highlighted the link between gender diversity and additional business value.
TransAlta is an active supporter of gender diversity as a driver for value, but also as an ethical business
practice. Our commitment to gender diversity in our business is evidenced by our female participation rates
on both our executive team and Board. As of Dec. 31, 2022, women made up 30 per cent of our executive
officer team and 36 per cent of our Board. These percentages are higher than the Canadian corporate
averages of board seats held by women (24 per cent) and women on executive teams (21 per cent),
according to data from all disclosing Canadian TSX-listed companies in Canada.
To further support female advancement, we have set targets to: (i) maintain equal pay for women in
equivalent roles, (ii) achieve 50 per cent representation of women on our Board by 2030 and (iii) achieve 40
per cent representation of women among all employees by 2030. Currently, women employees represent 26
per cent of all employees. Though the majority of our operational roles are currently held by male employees,
we remain committed to achieving the 40 per cent goal in this time period.
TransAlta was once again added to the Bloomberg Gender-Equality Index in 2022. Inclusion in the index
recognizes our comprehensive investment in workplace gender equality and our commitment to driving
progress by developing inclusive policies and disclosing data using Bloomberg’s gender reporting framework.
In 2022, the Company received the Globe and Mail's Women Lead Here award, which evaluates publicly
traded Canadian companies' ratio of female-identifying to male-identifying executives in the top three tiers of
executive leadership.
In 2022, we continued with the Women in Trades Scholarship with 13 different educational institutions for
eligible students enrolled in post-secondary trade programs. In 2022, we also continued with a female
apprenticeship program in our Generation business to strategically target the recruitment of female students
and train them to gain valuable experiential learning in the trades.
Workforce Health and Safety
The safety of our people, communities and the environment is one of our core values. Our focus on
Operational Excellence puts into action TransAlta’s value of enabling a safe environment for our people and
our communities. Operational Excellence is about powering and empowering our communities in a safe,
environmentally friendly and sustainable manner by investing in clean electricity generation and ensuring our
assets operate reliably and efficiently.
TransAlta's management systems underpin the delivery of safe, reliable and competitive electricity to our
customers and partners. Our Total Safety Management System is a combination of recognized best practices
in process safety, risk management, asset management, occupational health, safety and environmental
management. Since expanding our Occupational Health and Safety program in 2015 to encompass Total
Safety, we have transitioned from the development and implementation of this framework into continuous
improvement, always striving to achieve our Target Zero vision to operate our business with zero unexpected
asset failures and zero environmental, health and safety incidents.
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We made significant progress on our safety culture transformation journey. Training and development
initiatives were a top priority in which we completed behaviour-based safety training for all employees. This
training provides the tools and strategies to allow employees to influence their individual behaviours and
encourage personal ownership over safety outcomes. It helps create a psychologically safe environment in
our workplace as it encourages personal accountability towards safety.
One of our key safety indicator is the Total Recordable Injury Frequency ("TRIF"). TRIF tracks the number of
injury incidents that require treatment beyond first aid, relative to total exposure hours worked. Our TRIF
result for 2022 was 0.39 compared to 0.82 in 2021. In 2022, our TRIF exceeded the target of 0.61 and was
our best annual result on record. To put this into perspective, we had six recordable injuries in 2022
compared to 17 in 2021. We had zero lost-time injuries or restricted work injuries.
In part, our strong safety performance can be attributed to the extensive work we have done to support our
three key strategies: mature our safety culture, assess and address risk tolerance and standardize safety
information and technology. To sustain and enhance our safety culture, TransAlta conducted more than 100
one-hour peer board sessions for leaders across the fleet. These sessions reinforce the concepts learned in
behaviour-based safety training and provide leaders with key safety information to share with their teams.
The following represents our corporate safety performance and includes employees and contractors:
Year ended Dec. 31
Lost-time injuries
Medical aids
Restricted work injuries
Exposure hours
Total Recordable Injury Frequency (TRIF)
2022
2021
2020
0
6
0
3
9
5
5
9
2
3,058,000
4,134,000 3,948,000
0.39
0.82
0.81
We also focus on Total Safety Report Frequency. This is a leading indicator that measures Total Safety
Reports (hazard, near miss and positive observations) per worker per year. Total Safety Reports are proactive
in nature and demonstrate the actions we are taking to identify and prevent an injury or loss from occurring.
We also report and recognize positive behaviours in the workplace to enable a safe environment. This allows
us to not only manage incidents when they occur but identify opportunities to prevent them from occurring in
the first place. In 2022, we recorded 12 reports per worker, which is well above our threshold target of 10.
Evidence of the positive impacts associated with strong reporting is apparent when looking at our overall
safety performance. As a demonstration to TransAlta’s commitment to safety, SunHills Mining LP was
awarded the Safety Excellence Award from the Alberta Mine Safety Association in June 2022. This award is
for best safety performance of all Alberta mines under one million workforce hours based on 2021
performance. In 2022, our Gas segment teams also celebrated one year with no lost-time, medical aid or
restricted work injuries.
Organizational Culture and Structure
Our employees are central to value creation. Our corporate culture has evolved and adapted throughout our
111-year history. Our values are safety, innovation, sustainability, respect and integrity. These five values help
provide clarity for our employees and guide our behaviour and decision-making. They also provide a
foundation for leadership, collaboration, community support, personal growth and work-life balance. Through
corporate initiatives and support throughout all levels of leadership, we encourage our employees to
maximize their potential.
Culture Transformation
In 2022, we embarked on our culture transformation journey with our goal of becoming a culture of learning,
purpose and results. We developed a three-year culture strategy, Culture Charter and Culture Roadmap that
defines milestones. For alignment and transparency, all of these documents are available to our employees.
We launched an Employee Engagement Survey to gauge the employee experience, and based on survey
results, leaders created action plans to drive improvement and increase engagement at the business unit and
team level.
Finally, we are focused on employee well-being. To increase awareness, we have launched education
sessions on a variety of topics such as mental health, women’s health, men’s health, nutrition, resiliency, etc.
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Organizational Structure
As of Dec. 31, 2022, we had 1,222 (2021 – 1,282) active employees. This number has decreased by five per
cent from 2021 levels, following a reduction in positions in our coal fleet as part of our conversions to gas and
cessation of mining operations. With approximately 31 per cent of our employees being unionized, we strive
to maintain open and positive relationships with union representatives and regularly meet 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 employees to participate in collective bargaining.
Our organizational structure remained the same in 2022. Our business operates four generating segments,
with Gas, Wind and Solar, Hydro and Energy Transition. In addition, our Alberta Business Unit and Energy
Marketing Team optimize our asset fleet while managing commodity exposures. Our Corporate segment,
including finance, legal, human resources, administrative, business development and investor relations
functions, oversees our business and provides strategic alignment. The Company also includes a Shared
Services division that oversees our information technology, supply chain, engineering and accounting
functions. The consolidation and centralization of these functions has allowed us to streamline, standardize
and, where appropriate, automate these functions while reducing costs and improving service delivery across
the organization. Our operations portfolio is run by a single leadership team, which provides operational and
financial synergies, enhancing our competitiveness.
Employee Retention and Recognition
ESG-Linked Compensation
At TransAlta we have linked our ESG performance to our employees’ compensation, including that of our
executive leadership team. Our annual and long-term incentive pay for performance plans are linked to
TransAlta reaching various ESG goals, the targets and metrics of which are reviewed and approved annually
by our Board of Directors.
In 2022, 20 per cent of our annual incentive plan was linked to achieving specific ESG objectives: five per
cent related to our equity, diversity and inclusion score, five per cent referred to our organizational culture
improvements and 10 per cent was linked to safety. Further, 30 per cent of our annual incentive plan was tied
to growth, which is focused on expanding TransAlta’s portfolio of renewable generation and will help reduce
the Company’s overall GHG emissions intensity. Our long-term incentive plans include strategic goals related
to our focus on clean electricity, strong renewables growth, leading in ESG policy development, delivering on
our culture plan and our ED&I strategy. Refer to the Management Proxy Circular for additional details on our
ESG related compensation.
Employee Performance and Recognition
We strive to be an employer of choice through our total rewards programs, which include pay-for
performance incentive plans, as reviewed and approved by the Board of Directors. TransAlta’s annual and
long-term incentive plans are designed to measure and recognize employees’ contributions towards metrics
and targets. In order to motivate and engage employees in a timely manner, we have implemented select
employee recognition programs, including a quarterly recognition program and a peer-to-peer recognition
program.
Talent Development
TransAlta places significant focus on talent development and retention of its employees. Annually, employees
complete a combination of mandatory, optional and bespoke training as part of their roles. All employees have
access to speakers who are experts on topics as varied as ED&I, mental health, culture, soft skills
development and financial wellness.
Progressive Environmental Stewardship
We continue to increase financial value from natural or environmental capital-related business activities, while
minimizing our environmental footprint and potential risk factors related to environmental impacts. This
section covers natural capital management as per guidance from the International Integrated Reporting
Framework.
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Environmental Strategy
All energy sources used to generate electricity have some impact on the environment. While we are pursuing
a business strategy that includes investing in renewable energy resources such as wind, hydro and solar, we
also believe that natural gas will continue to play an important role in meeting energy needs during our clean
electricity transition. Our environmental management processes support our corporate strategy of ceasing
GHG-intensive coal operations. In 2026, our generation mix will be made up of natural gas and renewable
energy only, with a goal of 70 per cent of EBITDA from renewables.
Environmental Policy
Reducing the environmental impact of our activities benefits not only our operations and financial results, but
also the communities in which we operate. We have a proactive approach to minimizing environmental risks
and we anticipate this strategy will benefit our competitive position as stakeholders and society place an
increasing emphasis on successful environmental management. Our new Environmental Policy defines how
we are integrating the protection of nature and the environment within TransAlta’s strategy, Total Safety
Management System, as well as the principles of conduct for the management of natural resources.
Environmental Management System
At TransAlta, we operate our facilities in line with best practices related to environmental management
standards. Our environmental management processes are verified annually to ensure we continuously
improve our environmental performance. Our knowledge of environmental management systems ("EMS") has
matured since we aligned our processes in accordance with the internationally recognized ISO 14001 EMS
standard. Currently, the most material natural or environmental capital impacts to our business are GHG
emissions, air emissions (i.e., pollutants) and energy use. Other material impacts that we manage and track
performance on via our environmental management practices include land use, water use and waste
management.
In addition to our environmental management practices, we are subject to environmental laws and regulations
that affect aspects of our operations, including air emissions, water quality, wastewater discharges and the
generation, transport and disposal of waste and hazardous substances. The Company’s activities have the
potential to damage natural habitat, impact vegetation and wildlife, or cause contamination to land or water
that may require remediation under applicable laws and regulations. These laws and regulations require us to
obtain and comply with a variety of environmental registrations, licenses, permits and other approvals. The
environmental regulations in the jurisdictions in which we operate are robust. Both public officials and private
individuals may seek to enforce environmental laws and regulations against the Company. We interact with a
number of regulators on an ongoing basis.
Environmental Performance
Our performance on managing environmental aspects, reducing our environmental impact and capitalizing on
environmental initiatives includes the following:
Biodiversity
The importance of environmental protection and biodiversity is outlined in our new Environmental Policy as a
corporate responsibility for TransAlta and a responsibility of each employee and contractor working on
TransAlta's behalf. In 2022, the Company approved two new sustainability goals for the protection of nature
and biodiversity. For further information, refer to the 2023+ Sustainability Targets section of this MD&A.
Overseeing Biodiversity-Related Issues
TransAlta's GSSC assists the Board in fulfilling its oversight responsibilities with respect to the Company’s
monitoring of environmental regulations, public policy changes and the development of strategies, policies
and practices for the environment. For further information, refer to the Sustainability Governance section of
this MD&A.
Assessing Biodiversity Impacts of Our Value Chain
We consider the biodiversity impact at all of our existing operations (a greater focus has been given to mining
operations) and the biodiversity impacts of all new growth projects are evaluated in line with regulatory
compliance and with respect to TransAlta's focus on biodiversity health. Details on how we assess
biodiversity impacts of our value chain are presented in the sections below.
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Growth
Each new TransAlta development project must complete an in-depth environmental assessment (as
prescribed by the local regulation and in line with our own assessment practices) describing baseline
environmental conditions, identifying potential effects and developing mitigation strategies for identified
environmental sensitivities prior to construction and operation. These assessments have been specifically
designed to meet the environmental information requirements of the respective regions in which we operate
while identifying alignment with the intent of the standards and/or regulations applicable to these
jurisdictions. Typically, our renewable projects are greenfield development projects that require a higher level
of evaluation compared to our gas projects, which integrate into existing industrial facilities.
In addition, each greenfield development project has a detailed community engagement plan designed to
ensure all potentially impacted host landowners, stakeholders, agencies, businesses, non-governmental
organizations ("NGOs"), environmental NGOs and Indigenous communities understand the nature of the
projects, have multiple and varied opportunities for engagement and feedback and are able to engage in
meaningful dialogue and discussion with TransAlta and its representatives. The ultimate goal is addressing,
resolving and mitigating stakeholder or Indigenous community concerns before filing major permit
applications for all of our projects.
Day-to-day Operations
At our Alberta operations, in 2022, we continued with our Wildlife Monitoring Program designed to monitor
wildlife abundance and species diversity in the study area over time. Based on these surveys, TransAlta has
seen primarily stable or increasing biodiversity in the area, with various new bird species being detected over
the years and incidents of vehicle collisions decreasing due to lower speed limit restrictions. Some animal
population sizes fluctuate in the area based on weather conditions and available ground cover.
Our natural gas operations have a relatively limited impact on biodiversity. The facilities are frequently
constructed adjacent to existing industrial operations and TransAlta may not always be the holder of the
environmental permits. The land area these facilities occupy is also generally relatively small. One exception is
our Sarnia cogeneration facility. This facility is made up of 260 acres of brownfield industrial land, some of
which contains areas with tall grasses and potential wildlife. Care will be taken at the time of redevelopment
of this land to minimize impact to species-at-risk through the completion of species-at-risk surveys as well as
performing certain construction activities outside of nesting periods. For all sites that are under our
environmental scope, we adhere to all relevant environmental compliance permits.
At our hydro facilities, a major focus is on reducing the impact on fish and fish habitat. We adhere to
provincial and federal regulations and operate in accordance with facility approvals. We continue to work
toward operational improvement and regularly review our Environmental Operational Management Plans to
ensure our operating parameters are met.
At our wind and solar operations, an Operational Environmental Management Plan has been developed for
each asset to ensure that our facilities use environmentally sound and responsible practices that are based
on a philosophy of continuous improvement of environmental protection. Examples of environmental
initiatives to support our biodiversity focus include our bird and bat protection practices (installation of covers
to protect birds from possible electrocution), a bird and bat mortality database (records all injuries and
mortalities), environmentally sensitive resource monitoring (monitoring sensitive wildlife features in and
around our operating wind facilities), and long-term dataset collections (e.g., wildlife studies pre-construction
and post-construction). In addition, we continue to collaborate with industry and the scientific community to
address environmental concerns and impacts pertaining to biodiversity.
At our Centralia operations, in 2022, we built a riparian reforestation strategy for under-forested areas along
the Skookumchuck River within our Skookumchuck Wildlife Habitat Management Area. Approximately 40
acres will be restored in 2023 with conifer-dominated forest types along both sides of the river. This will
improve ecological functions important to river habitat including shade, sediment filtration, large woody
debris input, nutrient input and bank stabilization. In addition, we planted 1600 trees in the Chehalis Basin
Wetland Mitigation Bank and completed a vigorous weed control program to control reed canary grass and
invasive/noxious weeds.
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Energy Use
TransAlta uses energy in a number of different ways. We burn natural gas, diesel and coal (to the end of 2025
at Centralia) to generate electricity. We harness the kinetic energy of water and wind to generate electricity.
We also generate electricity from the sun. In addition to combustion of fuel sources, we also track combustion
of gasoline or diesel in our vehicles and the electricity use and fuel use for heating (such as natural gas) in the
buildings we occupy. Knowledge of how much energy we use allows us to optimize and create energy
efficiencies. As an electricity generator, we continually and consistently look for ways to optimize and create
efficiencies related to the use of energy.
The following captures our energy use (million gigajoules). Energy use decreased by four (4) per cent in 2022
over 2021. Some values do not sum to the indicated total due to rounding. Zeros (0) indicate truncated
values:
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Corporate and Energy Marketing
Total energy use (million gigajoules)
2022
2021
2020
0
0
130
64
0
195
0
0
118
86
0
204
0
0
138
141
0
279
Air Emissions
Our coal facility emits air emissions that we track, analyze and report to regulatory bodies. We also work on
mitigation solutions depending on the type of air emission. We report our major air emissions from coal, which
includes NOx, SO2, particulate matter and mercury. We continue reducing air emissions in our existing facilities
through our conversion and retirement of coal units in Alberta (completed in 2021) and Washington State
(planned completion by the end of 2025).
In 2022, we achieved our 2026 target of 95 per cent SO2 and 80 per cent NOx emissions reductions over
2005 levels. Since 2005, we have reduced SO2 emissions by 98 per cent and NOx by 83 per cent. By the end
of 2025, mercury emissions will be eliminated following the planned retirement of the Centralia remaining unit.
Particulate matter and SO2 emissions will also be virtually eliminated or considered negligible.
None of our previous Alberta coal facilities are located within 50 kilometres of dense or urban populations and
they all have been retired or converted to gas as of 2021. Our Centralia thermal facility in Washington State is
40 kilometres from a dense or urban population. As per guidance from SASB, “a facility is considered to be
located near an area of dense population if it is located within 49 kilometres of an area of dense
population” (being deemed to be a "minimum population of 50,000 persons"). The Centralia thermal facility
has two units and we retired one unit in 2020 and will retire the additional unit by the end of 2025, at which
time air emissions from our coal facilities will be eliminated.
Our gas facilities emit low levels of NOx that trigger reporting obligations to national regulatory bodies. These
gas facilities also produce trace amounts of SO2 and particulate matter, but at levels that are deemed
negligible and do not trigger any reporting requirements or compliance issues. Many of our gas facilities are
located in very remote and unpopulated regions, away from dense urban areas. Our Sarnia, Windsor, Ottawa,
Fort Saskatchewan and Ada gas facilities are our facilities with air emissions within 49 kilometres of dense or
urban environments.
Our total air emissions in 2022 decreased compared with 2021 levels. Specifically, NOx was reduced 21 per
cent, particulate matter was reduced 82 per cent and SO2 was reduced 86 per cent over 2021 levels. Mercury
emissions also decreased by 50 per cent over 2021 levels. Reductions in emissions were primarily due to
shutdowns during coal-to-gas conversions and coal unit retirements.
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The following represents our material air emissions. Figures have been rounded to the nearest one thousand
with the exception of particulate matter (rounded to the nearest one hundred) and mercury (rounded to the
nearest ten):
Year ended Dec. 31
SO2 (tonnes)
NOx (tonnes)
Particulate matter (tonnes)
Mercury (kilograms)
2022
1,000
11,000
400
20
2021
7,000
14,000
800
40
2020
12,000
21,000
4,000
60
Water
Our principal water use is for cooling and steam generation in our coal and gas facilities, but our hydro
operations also require water flow for operations. Water for coal and gas operations is withdrawn primarily
from rivers where we hold permits and must adhere to regulations on the quality of discharged water. The
difference between withdrawal and discharge, representing consumption, is due to several factors, which
include evaporation loss and steam production for customers.
Our water consumption reduction target is to reduce fleet-wide water consumption (withdrawals minus
discharge) by 20 million m3 or 40 per cent in 2026 over the 2015 baseline. Water consumption in 2015 was 45
million m3. This target is in line with the UN SDGs, specifically "Goal 6: Clean Water and Sanitation." Our water
consumption will fluctuate somewhat over the period of 2020-2025 as we transition off coal, convert and
repower gas facilities and ramp production upwards.
Typically, TransAlta withdraws in the range of 220-240 million m3 of water across our fleet. In 2022, we
withdrew approximately 230 million m3 (2021 – 240 million m3) and returned approximately 210 million m3
(2021 – 210 million m3) or 89 per cent. Overall, water consumption was approximately 30 million m3 (2021 – 30
million m3).
The following represents our total water consumption (million m3) over the last three years. Some values do
not sum to the indicated total due to rounding. Figures below have been rounded to the nearest 10 million m3:
Year ended Dec. 31
Water withdrawal
Water discharge
Total water consumption (million m3)
2022
230
210
30
2021
240
210
30
2020
230
200
40
Water Security
Our largest water withdrawal and discharge occurs at our Sarnia gas cogeneration facility (which produces
both electricity and steam for our customers). The facility operates as a once-through, non-contact cooling
system for our steam turbines. Despite large withdrawals from the adjacent St. Clair River to support our
Sarnia operations, we return approximately 97 per cent of the water withdrawn. Water from this source is
currently at low risk as per analysis from the SASB-endorsed Aqueduct Water Risk Atlas tool.
The Aqueduct Water Risk Atlas tool highlights that water risk is high at our interior and southern Western
Australia facilities due to high interannual variability in the region. Interannual variability refers to wider
variations in regional water supply from year to year. Our water supply at these facilities is provided at no cost
under PPAs with our mining customers, hence our risk is significantly mitigated. In addition, our customers
have developed conservation and re-use strategies aimed at recycling water for mining operational needs. All
water used in the region is sourced from scheme water. With respect to gas and diesel turbine water use,
water wash techniques and frequency of activities are continually modified to minimize consumption and
environmental impact. Water used in our operations is returned to our customers, who repurpose this water
for vegetation and dust suppression in their mining operations.
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At the South Hedland facility in Western Australia, water risk is also high due to the risk of flooding in the
region. The South Hedland facility was built above normal flood levels to mitigate potential risk from flooding.
During a category 4 cyclone event in the area and associated flooding in the region in 2019, the South
Hedland facility continued to generate power for the region. In addition, the South Hedland facility has
developed a Water Efficiency Management Plan with Water Corporation WA, the principal supplier of water,
wastewater and drainage services in Western Australia. Initiatives are aimed at reducing water consumption
and costs through innovative technology and efficiencies identified through facility management.
Dam Safety
Our dam safety programs include all hydroelectric developments, constructed ponds and fluid retaining
structures such as ash lagoons and canals, as well as associated equipment and structures and the personnel
required to operate, maintain and inspect these items. They are governed through our Dam Safety Policy and
Dam Safety Management System, which includes requirements on design, modification and decommissioning,
operation, maintenance and surveillance, public safety, emergency management and risk management.
TransAlta’s Board and its President and CEO oversee the effectiveness of our dam safety programs and
receive regular updates. In 2022, a member of the Board was designated as the Company's Dam Safety
Advisor to assist the Board in fulfilling its oversight role in regard to the Company's dam safety practices
given the unique and technical aspects of dam safety. In addition, TransAlta engages an external Dam Safety
Review Panel to provide external review of the program and its management, including overall assessment
and benchmarking against other national and international programs.
Our monitoring programs include:
•
•
Regular operations and engineering inspections;
Testing of critical equipment;
• Numerous instruments in the dams monitoring water level, temperature, movement, earthquake
detection;
• Use of drones and satellite remote movement monitoring;
•
•
Emergency plans and exercises with internal and external stakeholders; and
Regular third-party reviews that are shared with the regulators.
We work closely with local stakeholders including conservation authorities and public agencies on watershed
management, emergency planning and flood response. For example, in southern Alberta, our hydroelectric
facilities have played an increasingly important water management role following the flood of 2013. In 2021,
we renewed our previous agreement with the Government of Alberta for another five years to manage water
on the Bow River at our Ghost Reservoir facility to aid in potential flood mitigation efforts, as well as at our
Kananaskis River System (which includes the Interlakes, Pocaterra and Barrier hydroelectric plants) for
drought mitigation efforts. In 2022, we started decommissioning the Keephills Ash Lagoon, a facility that is no
longer needed for ash storage following the coal-to-gas conversion of Keephills Unit 2. This three-year
project will reshape the existing lagoon so that it is stable for the long term and is the first step towards
delicensing the structure.
TransAlta is proud of its reputation in dam safety. We participate in the Canadian Dam Association, Dam
Safety Interest Group of the Centre for Energy Advancement through Technological Innovation, United States
Society on Dams, Canadian Geotechnical Society, and Association of State Dam Safety Officials.
For information on our corporate emergency management program, refer to Public Health and Safety in the
Engaging with Our Stakeholders to Create Positive Relationships section of this MD&A.
Waste
The importance of environmental protection and waste management is outlined in our Environmental Policy as
a corporate responsibility for TransAlta and its employees, and contractors working on TransAlta's behalf. Our
waste data is reported annually to a number of different regulatory bodies.
Our waste reduction target is that by 2022 TransAlta will reduce total waste generation by 80 per cent over
the 2019 baseline of 1.5 million tonnes equivalent of waste generation. In 2022, we achieved this target with a
86 per cent waste reduction over 2019 levels.
In 2022, our operations generated approximately 208,000 tonnes equivalent of waste (2021 – 515,000
tonnes). Of the total waste generated, 89 per cent was non-hazardous waste and one (1) per cent was
directed to landfill (2021 – 0.2 per cent).
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The following represents our total waste production over the last three years. Figures have been rounded to
the nearest one thousand:
Year ended Dec. 31
2022
2021
2020
Total waste generation (tonnes equivalent)
208,000
515,000
1,135,000
Waste to landfill (tonne eq.)
Waste recycled (tonne eq.)
Waste reuse (tonne eq.)
% of total waste to landfill
% of total waste: hazardous
% hazardous waste to landfill
2,000
27,000
1,000
31,000
11,000
31,000
151,000
176,000
533,000
1
11
0.6
0.2
5
1.0
1
2
0.4
Our reuse waste or byproduct waste is generally sold to third parties. Our operating teams are diligent at not
only minimizing waste, but also maximizing recoverable value from waste. We have invested in equipment to
capture byproducts from the combustion of coal, such as fly ash, bottom ash, gypsum and cenospheres, for
subsequent sale. These non-hazardous materials add value to products like cement and asphalt, wallboard,
paints and plastics.
Coal Ash Management
Given our transition off coal, we ceased producing fly ash waste in Canada at the end of 2021 and will no
longer produce it past the end of 2025 in the US. The Company is looking at recovering fly ash that was
returned to its original source at Highvale mine to replace this supply, which is used extensively in the
concrete industry. By turning the recovered product into something marketable, it will continue to aid in
reducing the amount of cement produced and consequent emissions while offering new job and economic
growth opportunities. This innovative technology contributes to a circular economy and will reduce
reclamation liabilities for TransAlta.
Land Use
The largest land use associated with our operations is for surface mining of coal. Of the three mines we have
operated, the Whitewood mine in Alberta is completely reclaimed and the land certification process is
ongoing. Our Centralia mine in Washington State is currently in the reclamation phase and we have adopted a
target to fully reclaim this mine by 2040.
Our Highvale mine in Alberta ceased operations on Dec. 31, 2021, as part of our target to discontinue coal-
fired power generation in Canada at the end of 2021. The mine reclamation has been progressively executed
as part of our regulatory approvals and our target is to have it fully reclaimed by 2046. In 2022, our
reclamation team submitted our final reclamation plans. The updated plans align with community priorities for
the reclaimed land. Our reclamation plans at Highvale are set out on a life-cycle basis and include contouring
disturbed areas, re-establishing drainage, replacing topsoil and subsoil, re-vegetation and land management.
Our mining practice incorporates progressive reclamation where the final end use of the land is considered at
all stages of planning and development. Across our mining operations, to date we have reclaimed
approximately 12,000 acres (4,800 hectares), which is approximately 38 per cent of land disturbed.
Environmental Incidents and Spills
Minimizing our impact on the environment supports healthy ecosystems and mitigates our environmental
compliance risk and reputational risk. We maintain corporate incident management procedures, as part of our
Total Safety Management System, for appropriate initial response, investigation and lessons learned to
minimize environmental incidents. With respect to biodiversity management (management of ecosystems,
natural habitats and life in the areas we operate), we seek to establish robust environmental research and
data collection to establish scientifically sound baselines of the natural environment around our facilities to
ensure we can accurately evaluate the level of significance to biodiversity following an incident. We closely
monitor the air, land, water and wildlife in these areas to identify and curtail potential impacts.
In 2022, we recorded one (1) regulatory non-compliance environmental incident (2021 – two incidents). The
incident occurred at our Sarnia cogeneration facility and was a wastewater discharge exceedance from our
neutralization sump during water treatment. The incident resulted in two environmental enforcement actions
totalling $35,000.
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Regulatory non-compliance environmental incidents follow:
Year ended Dec. 31
Regulatory non-compliance environmental incidents
2022
1
2021
2
2020
2
Regarding spills and releases, typical spills that could occur at our operation sites are hydrocarbon-based.
Spills generally happen in low environmental impact areas and are almost always contained and fully
recovered. It is extremely rare for large spills to occur. Efforts are placed on providing immediate response to
all environmental spills to ensure assessment, containment and recovery of spilled materials result in minimal
impact to the environment.
The estimated volume of spills in 2022 was 246 m3 (2021 – 6 m3). Spill volumes in 2022 were higher due to
one environmental incident recorded at our Sarnia facility. The incident involved the release of low pH
wastewater discharge during water treatment and had negligible environmental impacts.
Significant environmental incidents follow:
Year ended Dec. 31
Significant environmental incidents
2022
0
2021
0
2020
6
There is a potential that ash ponds associated with our remaining coal facilities could fail. The probability of
this occurring is low, but the impact could be significant. We follow applicable environmental regulations with
respect to our ash ponds and satisfy ourselves that management is adequate given the robust regulations in
the jurisdictions where we operate. Management includes periodic inspections and appropriate mitigation if
issues are uncovered.
Weather
Abnormal weather events can impact our operations and give rise to risks. Due to the nature of our business,
our earnings are sensitive to seasonal weather variations. Variations in winter weather affect the demand for
electrical heating requirements while variations in summer weather affect the demand for electrical cooling
requirements. These variations in demand translate into spot market price volatility. Variations in precipitation
also affect water supplies, which in turn affect our hydroelectric assets. Also, variations in sunlight conditions
can have an effect on energy production levels from our solar facilities. Variations in weather may be
impacted by climate change resulting in sustained higher temperatures and rising sea levels, which could
have an impact on our generating assets. Ice can accumulate on wind turbine blades in the winter months.
The accumulation of ice on wind turbine blades depends on a number of factors, including temperature and
ambient humidity. Accumulated ice can have a significant impact on energy yields and could result in the wind
turbine experiencing more downtime. Extreme cold temperatures can also impact the ability of wind turbines
to operate effectively and this could result in more downtime and reduced production. In addition, climate
change could result in increased variability to our water and wind resources.
Our generation facilities and their operations are exposed to potential damage and partial or complete loss
resulting from environmental disasters (e.g., floods, strong winds, wildfires, earthquakes, tornados and
cyclones), equipment failures and other events beyond our control. Climate change can increase the
frequency and severity of these extreme weather events. The occurrence of a significant event that disrupts
the operation or ability of the generation facilities to produce or sell power for an extended period, including
events that preclude existing customers from purchasing electricity, could have a material adverse effect. In
certain cases, there is the potential that some events may not excuse us from performing our obligations
pursuant to agreements with third parties. The fact that several of our generation facilities are located in
remote areas may make access for repair of damage difficult. Refer to the Governance and Risk Management
section of this MD&A for further discussion on weather-related risks.
Delivering Reliable, Low-Cost and Sustainable Energy
TransAlta’s goal is to be a leading customer-centred clean electricity company, one that is committed to a
sustainable future. Our strategy is focused on meeting our customers' need for clean, low-cost and reliable
electricity, operational excellence and continual improvement in everything that we do. This section covers
manufactured, intellectual and social and relationship capital management as per guidance from the
International Integrated Reporting Framework.
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Energy Affordability
TransAlta focuses on assisting commercial and industrial customers in managing their cost of energy.
TransAlta has a full suite of procurement strategies and products with various terms available to our
customers to assist in understanding and reducing their energy costs.
For customers interested in making a long-term commitment to obtain predictable costs, TransAlta has the
experience to develop renewable energy facilities, battery energy storage systems and hybrid solutions, or
long-term offtake agreements from its existing and future renewable and gas-fired facilities.
End-Use Efficiency and Demand
TransAlta’s commercial and industrial customers have access to an extensive set of monthly reports providing
detailed tracking of customer usage, allowing for corrective action as required, as well as cost-saving
recommendations.
Our Power Factor Report advises customers if their sites are operating at less than a 90 per cent power factor
so they can consider installing energy-efficient equipment. By reducing the customer’s power system demand
charge through power factor correction, the customer’s site puts less strain on the electricity grid and
reduces its carbon footprint. TransAlta’s Site Health Report advises customers of a site whose peak demand
has been permanently reduced for a variety of reasons from its initial in-service date. The customer may be
paying a higher demand charge each month to the distribution company based on the original peak demand
expected at the site. TransAlta collaborates with the customer and determines the new peak demand based
on the customer’s operation. The customer, working with the distribution company, may find it economic to
buy down the distribution contract to reduce the monthly distribution costs going forward.
Grid Resiliency
As a large electricity generator, TransAlta works diligently to ensure the power we provide our customers is
reliable, affordable and has low environmental impact. We provide decentralized and customized power
solutions to industrial customers. In 2021, TransAlta agreed to build the Northern Goldfields solar project in
Western Australia to provide renewable solar electricity supported with a battery energy storage system to
the Goldfields-based operations of BHP. We also supply power to centralized power systems and own and
operate transmission grid infrastructure in Alberta that addresses system reliability needs.
In all jurisdictions where we operate, we work closely with the system operators to ensure overall supply
adequacy and reliability of the grid. We consider a myriad of factors in our planning and operation decisions
that could put grid resiliency at risk, including renewable energy intermittency, cyberattacks, extreme
weather events and natural disasters. We are also committed to ensuring strong compliance with North
American Electric Reliability Corporation standards and Alberta Reliability Standards for the power plant and
transmission infrastructure that we own and operate.
As a Company, we are keenly focused on deploying clean power generation and new technology solutions to
meet the emerging and future needs of the electric system that we operate in. For example, in Alberta, we
brought online the first battery storage project, called WindCharger, in 2020 that is co-located with our
Summerview II wind facility to create an emissions-free, peaking resource. This resource is participating in the
AESO’s pilot fast frequency response initiative to support intertie operations. Beyond the fast frequency
response initiative, WindCharger introduces a resource with a response time that is unmatched by existing
generation technologies and can be operated with a high level of reliability to support the growing need for
primary frequency response and system inertial response and resiliency to support a decarbonized grid with a
supply mix made up of intermittent renewable resources.
For more information on technologies to support grid resiliency, refer to the Enabling Innovation and
Technology Adoption section of this MD&A. For more information on extreme weather events and natural
disasters, refer to Weather in the Progressive Environmental Stewardship section of this MD&A.
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Sustainability Governance
In order for an organization to truly integrate sustainability, it requires accountability at the Board and
executive level. It requires an understanding of ESG issues and associated corporate actions to address these
issues, while continuing to balance operations and growth.
Sustainability is overseen by TransAlta's GSSC of the Board. The GSSC assists the Board in fulfilling its
oversight responsibilities with respect to the Company’s monitoring of climate change, environmental, health
and safety regulations, public policy changes and the development of strategies, policies and practices for
climate change, environment, health and safety and social well-being, including human rights, working
conditions and responsible sourcing.
The following policies help govern sustainability at TransAlta and are publicly available in the Governance
section of the Investor Centre on our website:
• Corporate Code of Conduct
•
Supplier Code of Conduct
• Whistleblower Policy
•
Total Safety Management Policy
• Human Rights and Discrimination Policy
•
•
•
Indigenous Relations Policy
Board and Workforce Diversity Policy and Diversity and Inclusion Pledge
Environmental Policy
Our sustainability memberships include key sustainability organizations and working groups such as the
EXCEL Partnership, the Canadian Business for Social Responsibility and the Electricity Canada Sustainable
Electricity Steering Committee, which all provide validation and support of our sustainability strategy and
practices.
In 2022, we refreshed our material sustainability factors. They are presented below in alphabetical order.
•
•
•
Air quality and emissions
Asset integrity and grid resiliency
Biodiversity and land management
• Climate change and greenhouse gas emissions
• Dam safety
•
•
•
Energy use and conservation
Equity, diversity and inclusion
Ethics and business conduct
• Health, safety and well-being
• Human rights and labour practices
•
•
•
•
•
•
•
•
•
Indigenous relationships and partnerships
Information asset protection and cybersecurity
Renewable energy and innovative technologies
Security and emergency preparedness and response
Stakeholder engagement and community investment
Supply chain and sustainable sourcing
Sustainability governance
Sustainable finance
Talent attraction, retention and development
• Waste management
• Water management
For additional details on governance, refer to the Governance and Risk Management section of this MD&A.
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Governance and Risk Management
Our business activities expose us to a variety of risks and opportunities including, but not limited to,
regulatory changes, rapidly changing market dynamics and increased volatility in our key commodity markets.
Our goal is to manage these risks and opportunities so that we are in a position to develop our business and
achieve our goals while remaining reasonably protected from an unacceptable level of risk or financial
exposure. We use a multilevel risk management oversight structure to manage the risks and opportunities
arising from our business activities, the markets in which we operate and the political environments and
structures with which we interact.
During the year ended Dec. 31, 2022, the global economy continued to recover from the COVID-19 pandemic.
On Feb. 24, 2022, the Russian Government’s invasion of Ukraine set off historic policy actions and global
coordination of sanctions and commitments to reduce dependency on Russian energy including natural gas.
This has contributed to global supply chain disruptions, commodity price volatility and potential increases to
cybersecurity risk. The Company continues to mitigate inflationary and supply chain risks pertaining to
current development projects by locking in the prices of key materials where possible and employing other
supply chain risk mitigation strategies. A prolonged conflict and recent inflationary and supply chain dynamics
may impact future construction project costs with the risk of rising prices on key materials. Accordingly, as
the Russia-Ukraine conflict continues to evolve and its indirect impacts along with rising inflation rates within
the global markets remain uncertain at this time, management continues to monitor and assess the impacts.
Governance
The key elements of our governance practices are:
•
Employees, management and the Board are committed to ethical business conduct, integrity and
honesty;
• We have established key policies and standards to provide a framework for how we conduct our
•
•
•
business;
The Chair of our Board and all directors, other than our President and CEO, are independent within
the meaning of National Instrument 58-101 — Disclosure of Corporate Governance Practices;
The Board is comprised of individuals with a mix of skills, knowledge and experience that are critical
for our business and our strategy;
The effectiveness of the Board is achieved through robust annual evaluations and continuing
education of our directors; and
• Our management and the Board facilitate and foster an open dialogue with shareholders and
community stakeholders.
Commitment to ethical conduct is the foundation of our corporate governance model. We have adopted the
following codes of conduct to guide our business decisions and everyday business activities:
• Corporate Code of Conduct, which applies to all employees and officers of TransAlta and its
subsidiaries;
• Directors’ Code of Conduct;
•
•
•
Supplier's Code of Conduct;
Finance Code of Ethics, which applies to all financial employees of the Company; and
Energy Trading Code of Conduct, which applies to all of our employees engaged in energy marketing.
Our Corporate Code of Conduct outlines the standards and expectations we have for our employees, officers,
directors, consultants and suppliers with respect to, among other things, the protection and proper use of our
assets. The codes also provide guidelines with respect to securing our assets, avoiding conflicts of interest,
respect in the workplace, social responsibility, privacy, compliance with laws, insider trading, environment,
health and safety and our commitment to ethical and honest conduct. Our Corporate Code of Conduct and
Directors' Code of Conduct each goes beyond the laws, rules and regulations that govern our business in the
jurisdictions in which we operate; they outline the principal business practices with which all employees and
directors must comply.
Our employees, officers and directors are reminded annually about the importance of ethics and
professionalism in their daily work and must certify annually that they have reviewed and understand their
responsibilities as set forth in the respective codes of conduct. This certification also requires our employees,
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officers and directors to acknowledge that they have complied with the standards set out in the respective
code during the last calendar year.
The Board provides stewardship of the Company and ensures that the Company establishes key policies and
procedures for the identification, assessment and management of principal risks and strategic plans. The
Board monitors and assesses the performance and progress of the Company’s goals through candid and
timely reports from the CEO and the senior management team. We have also established an annual evaluation
process whereby our directors are provided with an opportunity to evaluate the Board, Board committees,
individual directors and the Chair of the Board’s performance.
In order to allow the Board to establish and manage the financial, environmental and social elements of our
governance practices, the Board has established the AFRC, GSSC, the Human Resources Committee (the
“HRC”) and the IPC.
The AFRC, consisting of independent members of the Board, provides assistance to the Board in fulfilling its
oversight responsibility relating to the integrity of our consolidated financial statements and the financial
reporting process; the systems of internal accounting and financial controls; the internal audit function; the
external auditors’ qualifications and terms and conditions of appointment,
including remuneration,
independence, performance and reports; and the legal and risk compliance programs as established by
management and the Board. The AFRC approves our Commodity and Financial Exposure Management
policies and reviews quarterly ERM reporting.
The GSSC is responsible for developing and recommending to the Board a set of corporate governance
principles applicable to the Company and for monitoring compliance with these principles. The GSSC is also
responsible for Board recruitment, succession planning and for the nomination of directors to the Board and
its committees. In addition, the GSSC assists the Board in fulfilling its oversight responsibilities with respect to
the Company’s monitoring of climate change, environmental, health and safety regulations, public policy
changes and the development of strategies, policies and practices for climate change, environmental, health
and safety and social well-being, including human rights, working conditions and responsible sourcing. The
GSSC also receives an annual report on the annual codes of conduct certification process. For further
information on the Board's oversight of climate-related factors, refer to the Climate Change Governance in
ESG section of this MD&A.
In regards to overseeing and seeking to ensure that the Company consistently achieves strong environment,
health and safety (“EH&S”) performance, the GSSC undertakes a number of actions that include: (i) receiving
regular reports from management regarding environmental compliance, trends and TransAlta’s responses;
(ii) receiving reports and briefings on management’s initiatives with respect to changes in climate change
legislation, policy developments as well as other draft initiatives and the potential impact such initiatives may
have on our operations; (iii) assessing the impact of the GHG policies implementation and other legislative
initiatives on the Company’s business; (iv) reviewing with management the EH&S policies of the Company;
(v) reviewing with management the health and safety practices implemented within the Company, as well as
the evaluation and training processes put in place to address problem areas; (vi) discussing with management
ways to improve the EH&S processes and practices; and (vii) reviewing the effectiveness of our response to
EH&S issues and any new initiatives put in place to further improve the Company’s EH&S culture.
The HRC is empowered by the Board to review and approve key compensation and human resources policies
of the Company that are intended to attract, recruit, retain and motivate employees of the Company. The HRC
also makes recommendations to the Board regarding the compensation of the CEO, including the review and
adoption of equity-based incentive compensation plans, the adoption of human resources policies that
support human rights and ethical conduct and the review and approval of executive management succession
and development plans.
The IPC is empowered by the Board to oversee management's investment conclusions and the execution of
major, Board-approved capital expenditure projects that further the Company's strategic plans. The IPC
provides assistance to the Board in fulfilling its oversight responsibilities with respect to broadly reviewing
and monitoring project management and control processes, financial profile, capital costs, procurement
practices and project schedules in a more in-depth manner than time permits during regularly scheduled
Board meetings.
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The responsibilities of other stakeholders within our risk management oversight structure are described
below:
The CEO and executive management review and report on key risks quarterly. Specific Trading Risk
Management reviews are held monthly by the Commodity Risk and Compliance Committee and weekly by the
commodity risk team, the commercial managers in Trading and Marketing and the Executive Vice-President,
Finance and Chief Financial Officer.
The Investment Committee is a management committee chaired by our Senior Vice-President, M&A, Strategy
and Treasurer and comprises the President and Chief Executive Officer; Executive Vice-President, Finance
and Chief Financial Officer; Executive Vice President, Legal, Commercial and External Affairs; Executive Vice-
President, Generation; Executive Vice-President, Alberta; and Vice-President, Strategic Finance and Investor
Relations. It reviews and approves all major capital expenditures including growth, productivity, life
extensions and major coal outages. Projects that are approved by the Investment Committee will then be put
forward for approval by the Board, if required.
The Commodity Risk & Compliance Committee is chaired by our Executive Vice-President, Finance and Chief
Financial Officer and comprises at least three members of senior management. It oversees the risk and
compliance program in trading and ensures that this program is adequately resourced to monitor trading
operations from a risk and compliance perspective. It also ensures the existence of appropriate controls,
processes, systems and procedures to monitor adherence to policy.
The Hydro Operating Committee consists of two members who are Brookfield employees with expertise in
hydro facility management and two TransAlta members. This committee was formed in 2019 for the purpose
of collaborating on matters in connection with the operation and maximization of the value, of TransAlta's
Alberta Hydro Assets. It is delivering on its objectives by reviewing the operating, maintenance, safety and
environmental aspects of TransAlta's Alberta Hydro Assets and, following that review, providing expert advice
and recommendations to TransAlta’s hydro operational team. The Hydro Operating Committee has an initial
term of six years, which can be extended for an additional two years.
TransAlta is listed on the Toronto Stock Exchange and the New York Stock Exchange and is subject to the
governance regulations, rules and standards applicable under both exchanges. Our corporate governance
practices meet the following governance rules and guidelines of the TSX and Canadian Securities
Administrators: (i) Multilateral Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim
Filings; (ii) National Instrument 52-110 — Audit Committees; (iii) National Policy 58-201 — Corporate
Governance Guidelines; and iv) National Instrument 58-101 — Disclosure of Corporate Governance
Practices. As a “foreign private issuer” under US securities laws, we are generally permitted to comply with
Canadian corporate governance requirements. Additional information regarding our governance practices can
be found in our most recent management information circular.
Risk Controls
Our risk controls have several key components:
Enterprise Tone
We strive to foster beliefs and actions that are true to and respectful of, our many stakeholders. We do this
by investing in communities where we live and work, operating and growing sustainably, putting safety first
and being responsible to the many groups and individuals with whom we work.
Policies
We maintain a comprehensive set of enterprise-wide policies. These policies establish delegated authorities
and limits for business transactions, as well as allow for an exception approval process. Periodic reviews and
audits are performed to ensure compliance with these policies. All employees and directors are required to
sign a Corporate Code of Conduct on an annual basis.
Reporting
On a regular basis, residual risk exposures are reported to key decision-makers including the Board, the
AFRC, senior management and/or the Commodity Risk & Compliance Committee, as applicable. Reporting to
this latter committee includes analysis of new risks, monitoring of status to risk limits, review of events that
can affect these risks and discussion and review of the status of actions to minimize risks. This monthly
reporting provides for effective and timely risk management and oversight.
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Whistleblower System
We have a process in place where employees, contractors, shareholders or other stakeholders may
confidentially or anonymously report any potential legal or ethical concerns, including concerns relating to
accounting, internal control accounting, auditing or financial matters or relating to alleged violations of any
laws or our Corporate Code of Conduct. These concerns can be submitted confidentially and anonymously,
either directly to the AFRC or through TransAlta’s toll-free telephone or online Ethics Helpline. The AFRC Chair
is immediately notified of any material complaints and, otherwise, the AFRC receives a report at every
quarterly committee meeting on all findings related to any material complaints or complaints relating to
accounting or financial reporting or alleged breaches in internal controls over financial reporting.
Value at Risk and Trading Positions
Value at risk (“VaR”) is one of the primary measures used to manage our exposure to market risk resulting
from commodity risk management activities. VaR is calculated and reported on a daily basis. This metric
describes the potential change in the value of our trading portfolio over a three-day period within a 95 per
cent confidence level, resulting from normal market fluctuations.
VaR is a commonly used metric that is employed by industry to track the risk in commodity risk management
positions and portfolios. Two common methodologies for estimating VaR are the historical variance/
covariance and scenario analysis approaches. We estimate VaR using the historical variance/covariance
approach. An inherent limitation of historical variance/covariance VaR is that historical information used in the
estimate may not be indicative of future market risk. Stress tests are performed periodically to measure the
financial impact to the trading portfolio resulting from potential market events, including fluctuations in market
prices, volatilities of those prices and the relationships between those prices. We also employ additional risk
mitigation measures. VaR at Dec. 31, 2022, associated with our proprietary commodity risk management
activities was $4 million (2021 – $2 million). Refer to the Risk Factors – Commodity Price Risk section of this
MD&A below for further discussion.
Risk Factors
Risk is an inherent factor of doing business. The following section addresses some, but not all, risk factors
that could affect our future plans, performance, results or outcomes and our activities in mitigating those
risks. These risks do not occur in isolation, but must be considered in conjunction with each other. Further
information on the Company's risk factors can be found in the Risk Factors section of the AIF, which risk
factors are hereby incorporated by reference and available on our website at www.transalta.com and under
our profile on SEDAR at www.sedar.com and on EDGAR at www.edgar.gov.
A reference herein to a material adverse effect on the Company means such an effect on the Company or its
business, operations, financial condition, results of operations and/or its cash flows, as the context requires.
For some risk factors, we show the after-tax effect on net earnings (loss) of changes in certain key variables.
The analysis is based on business conditions and production volumes in 2022. Each item in the sensitivity
analysis assumes all other potential variables are held constant. While these sensitivities are applicable to the
period and the magnitude of changes on which they are based, they may not be applicable in other periods,
under other economic circumstances or for a greater magnitude of changes. The changes in rates should also
not be assumed to be proportionate to earnings in all instances.
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Volume Risk
Volume risk relates to the variances from our expected production. The financial performance of our hydro,
wind and solar operations is highly dependent upon the availability of their input resources in a given year.
Shifts in weather or climate patterns, seasonal precipitation and the timing and rate of melting and runoff may
impact the water flow to our facilities. The strength and consistency of the wind resource at our facilities
impacts production. The operation of thermal facilities can also be impacted by ambient temperatures and the
availability of water and fuel. Where we are unable to produce sufficient quantities of output in relation to
contractually specified volumes, we may be required to pay penalties or purchase replacement power in the
market.
We manage volume risk by:
•
Actively managing our assets and their condition in order to be proactive in facility maintenance so
that our facilities are available to produce when required;
• Monitoring water resources throughout Alberta to the best of our ability and optimizing this resource
against real-time electricity market opportunities;
•
Placing our facilities in locations we believe to have adequate resources to generate electricity to
meet the requirements of our contracts. However, we cannot guarantee that these resources will be
available when we need them or in the quantities that we require; and
• Diversifying our fuels and geography to mitigate regional or fuel-specific events.
The sensitivity of volumes to our net earnings is shown below:
Factor
Availability/production
Increase or decrease
(Per cent)
Approximate impact on
net earnings (million)
1
$14
Generation Equipment and Technology Risk
There is a risk of equipment failure due to wear and tear, latent defect, design error or operator error, among
other things, which could have a material adverse effect on the Company. Although our generation facilities
have generally operated in accordance with expectations, there can be no assurance that they will continue
to do so. Our facilities are exposed to operational risks such as failures due to cyclic, thermal and corrosion
damage in boilers, generators and turbines, as well as other issues that can lead to outages and increased
production risk. If facilities do not meet availability or production targets specified in their PPA or other long-
term contracts, we may be required to compensate the purchaser for the loss in the availability of production
or record reduced energy or capacity payments. For merchant facilities, an outage can result in lost merchant
opportunities. Therefore, an extended outage could have a material adverse effect on our business, financial
condition, results of operations or our cash flows.
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As well, we are exposed to procurement risk for specialized parts that may have long lead times. If we are
unable to procure these parts when they are needed for maintenance activities, we could face an extended
period where our equipment is unavailable to produce electricity.
We manage our generation equipment and technology risk by:
• Operating our facilities within defined industry standards that optimizes availability over their
commercial operating life;
•
•
•
Performing preventive maintenance in accordance with applicable industry practices, major
equipment supplier recommendations and our operating experience;
Adhering to comprehensive maintenance programs and regular turnaround schedules;
Adjusting maintenance plans by facility to reflect equipment type, age and commercial risk;
• Having adequate business interruption insurance in place to cover extended forced outages;
• Having clauses in our PPAs and other long-term contracts that allow us to declare force majeure in
the event of an unforeseen failure;
•
Selecting and applying proven technology in our generating facilities, where practical;
• Where technology is newer, ensuring service agreements with equipment suppliers include
appropriate availability and performance guarantees;
• Monitoring our fleet against industry performance to identify issues or advancements that may
impact performance and adjusting our maintenance and investment programs accordingly;
• Negotiating strategic supply agreements with selected vendors to ensure key components are
readily available in the event of a significant outage;
• Monitoring the condition of our assets and performing predictive analytics, and adjusting our
maintenance programs to maintain availability;
•
•
Entering into long-term arrangements with our strategic supply partners to ensure availability of
critical spare parts; and
Implementing long-term asset management strategies that optimize the life cycles of our existing
facilities and/or identify replacement requirements for generating assets.
Commodity Price Risk
We have exposure to movements in certain commodity prices, including the market price of electricity and
fuels used to produce electricity in both our electricity generation and proprietary trading businesses.
We manage the financial exposure associated with fluctuations in electricity price risk by:
•
Entering into long-term contracts that specify the price at which electricity, steam and other services
are provided;
• Maintaining a portfolio of short-, medium- and long-term contracts to mitigate our exposure to short-
term fluctuations in commodity prices;
•
•
Purchasing natural gas coincident with production for merchant facilities so spot market spark
spreads are adequate to produce and sell electricity at a profit; and
Ensuring limits and controls are in place for our proprietary trading activities.
In 2022, we had approximately 83 per cent (2021 – 78 per cent) of total production under short-term and
long-term contracts and hedges. In the event of a planned or unplanned outage or other similar event,
however, we are exposed to changes in electricity prices on purchases of electricity from the market to fulfil
our supply obligations under these short- and long-term contracts.
We manage the financial exposure to fluctuations in the cost of fuels used in production by:
•
Entering into long-term contracts that specify the price at which fuel is to be supplied to our facilities;
• Hedging emissions costs by entering into various emission trading arrangements; and
•
Selectively using hedges, where available, to set prices for fuel.
In 2022, 82 per cent (2021 – 70 per cent) of our gas consumption used in generating electricity was
contractually fixed or passed through to our customers and 100 per cent (2021 – 80 per cent) of our
purchased coal was contractually fixed.
Actual variations in net earnings (loss) can vary from calculated sensitivities and may not be linear due to
optimization opportunities, co-dependencies and cost mitigations, production, availability and other factors.
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Natural Gas Supply and Price Risk
Having sufficient natural gas and natural gas transportation services available at our gas facilities is essential
to maintaining the reliability and availability of those facilities. Ensuring adequate pipeline transportation
service and natural gas supply for our gas units may be impacted by, among other things, the timing of
receiving regulatory and other approvals for firm transportation commitments, weather-related events, work
stoppages, system maintenance, variability in pipeline hydraulics pressure and flows and impacts due to other
naturally caused events. Pricing of natural gas is driven by market supply and demand fundamentals for
natural gas in North America and globally. We are exposed to changes in natural gas prices, which may
impact the profitability of our facilities and how the facilities are dispatched into the market.
We manage gas supply and price risk by:
• Working to ensure that we have at least two pipelines supplying the gas used in electrical generation
in Alberta;
• Contracting for firm gas delivery and supply;
• Monitoring the financial viability of gas producers and pipelines;
• Hedging gas price exposure; and
• Monitoring pipeline maintenance schedules and transportation availability.
Environmental Compliance Risk
Environmental compliance risks are risks to our business associated with existing and/or changes in
environmental regulations. New emission reduction objectives for the power sector are being established by
governments in Canada, Australia and the US. We anticipate continued and growing scrutiny by investors and
other stakeholders relating to sustainability performance. These changes to regulations may affect our
earnings by reducing the operating life of generating facilities and imposing additional costs on the generation
of electricity through such measures as emission caps or taxes, requiring additional capital investments in
emission abatement technology or requiring us to invest in offset credits. It is anticipated that these
compliance costs will increase due to increased political and public attention to environmental concerns.
We manage environmental compliance risk by:
•
Seeking continuous improvement in numerous performance metrics such as emissions, safety, land
and water impacts and environmental incidents;
• Conducting environmental health and safety management system audits to assess conformance to
our Total Safety Management System, which is designed to continuously improve performance;
• Committing significant experienced resources to work with regulators in Canada, Australia and the
US to advocate that regulatory changes are well-designed and cost-effective;
• Developing compliance plans that address how to meet or surpass emission standards for GHG,
•
•
•
mercury, SO2 and NOx, which will be adjusted as regulations are finalized;
Purchasing carbon emissions reduction offsets or credits;
Investing in renewable energy projects, such as wind, solar and hydro generation and storage
technologies; and
Incorporating change-in-law provisions in contracts that allow recovery of certain compliance costs
from our customers.
We are committed to remaining in compliance with all environmental regulations relating to operations and
facilities. Compliance with both regulatory requirements and management system standards is regularly
audited through our performance assurance policy and results are reported to the GSSC.
TransAlta Corporation • 2022 Integrated Report
M125
MANAGEMENT'S DISCUSSION AND ANALYSIS
Credit Risk
Credit risk is the risk to our business associated with changes in the creditworthiness of entities with which
we have commercial exposures. This risk results from the ability of a counterparty to either fulfil its financial
or performance obligations to us or where we have made a payment in advance of the delivery of a product
or service. The inability to collect cash due to us or to receive products or services may have an adverse
impact upon our net earnings (loss) and cash flows.
We manage our exposure to credit risk by:
•
•
•
•
Establishing and adhering to policies that define credit limits based on the creditworthiness of
counterparties, contract term limits and the credit concentration with any specific counterparty;
Requiring formal sign-off on contracts that include commercial, financial, legal and operational
reviews;
Requiring security instruments, such as parental guarantees, letters of credit and cash collateral or
third-party credit insurance if a counterparty goes over its limits. Such security instruments can be
collected if a counterparty fails to fulfil its obligation; and
Reporting our exposure using a variety of methods that allow key decision-makers to assess credit
exposure by counterparty. This reporting allows us to assess credit limits for counterparties and the
mix of counterparties based on their credit ratings.
If established credit exposure limits are exceeded, we take steps to reduce this exposure, such as by
requesting collateral, if applicable, or by halting commercial activities with the affected counterparty.
However, there can be no assurances that we will be successful in avoiding losses as a result of a contract
counterparty not meeting its obligations.
As needed, additional risk mitigation tactics will be taken to reduce the risk to TransAlta. These risk mitigation
tactics may include, but are not limited to, immediate follow-up on overdue amounts, adjusting payment
terms to ensure a portion of funds are received sooner, requiring additional collateral, reducing transaction
terms and working closely with impacted counterparties on negotiated solutions.
Our credit risk management profile and practices have not changed materially from Dec. 31, 2021. We had no
material counterparty losses in 2022. We continue to keep a close watch on changes and trends in the market
and the impact these changes could have on our energy trading business and hedging activities and will take
appropriate actions as required, although no assurance can be given that we will always be successful.
The following table outlines our maximum exposure to credit risk without taking into account collateral held or
right of set-off, including the distribution of credit ratings, as at Dec. 31, 2022:
Trade and other receivables(1,2)
Long-term finance lease receivables
Risk management assets(1)
Loan receivable(2)
Total
Investment
grade
(Per cent)
Non-investment
grade
(Per cent)
Total
(Per cent)
87
100
92
—
13
—
8
100
100
100
100
100
Total
amount
1,585
129
870
37
2,621
(1) Letters of credit and cash and cash equivalents are the primary types of collateral held as security related to these amounts.
(2) Includes $37 million loan receivable included within other assets with a counterparty that has no external credit rating. The current
portion of $4 million was excluded from trade and other receivables as it is included in loan receivable in the table above.
The maximum credit exposure to any one customer for commodity trading operations, including the fair value
of open trading positions net of any collateral held, is $64 million (2021 – $37 million).
TransAlta Corporation • 2022 Integrated Report
M126
MANAGEMENT'S DISCUSSION AND ANALYSIS
Counterparties enter into certain electricity and natural gas purchase and sale contracts for the purposes of
asset-backed sales and proprietary trading. The terms and conditions of these contracts require the
counterparties to provide collateral when the fair value of the obligation pursuant to these contracts is in
excess of any credit limits granted. Downgrades in creditworthiness by certain credit rating agencies may
impact our ability to enter into these contracts or any ordinary course contract, decrease the credit limits
granted and increase the amount of collateral that may have to be provided. Certain existing contracts
contain credit rating contingent clauses, that, when triggered, automatically increase costs under the contract
or require additional collateral to be posted. Where the contingency is based on the lowest single rating, a
one-level downgrade from a credit rating agency with an originally higher rating may not, however, trigger
additional direct adverse impact.
Currency Rate Risk
We have exposure to various currencies as a result of our investments and operations in foreign jurisdictions,
the earnings from those operations, the acquisition of equipment and services and foreign-denominated
commodities from foreign suppliers and our US-denominated debt. Our exposures are primarily to the US and
Australian currencies. Changes in the values of these currencies in relation to the Canadian dollar may affect
our earnings, cash flows or the value of our foreign investments to the extent that these positions or cash
flows are not hedged or the hedges are ineffective.
We manage our currency rate risk by establishing and adhering to policies that include:
• Hedging our net investments in US operations using US-denominated debt;
•
Entering into forward foreign exchange contracts to hedge future foreign-denominated expenditures
including our US-denominated senior debt that is outside the net investment portfolio; and
• Hedging our expected foreign operating cash flows. Our target is to hedge a minimum of 60 per cent
of our forecasted foreign operating cash flows over a four-year period, with a minimum of 90 per
cent in the current year, 70 per cent in the next year, 50 per cent in the third year and 30 per cent in
the fourth year. The US and Australian exposure, net of debt service and sustaining capital
expenditures, is managed with forward foreign exchange contracts.
The sensitivity of our net earnings to changes in foreign exchange rates has been prepared using
management’s assessment that an average $0.03 increase or decrease in the US or Australian currencies
relative to the Canadian dollar is a reasonable potential change over the next quarter and is shown below:
Factor
Exchange rate
Increase or decrease
Approximate impact
on net earnings (million)
$0.03
$14
Liquidity Risk
Liquidity risk relates to our ability to access capital to be used to fund capital projects, refinance debt and pay
liabilities, engage in trading and hedging activities and general corporate purposes. Credit ratings facilitate
these activities and changes in credit ratings may affect our ability and/or the cost of accessing capital
markets, or establishing normal course derivative or hedging transactions, including those undertaken by our
Energy Marketing segment.
We continue to focus on maintaining our financial position and flexibility. Credit ratings issued for TransAlta,
as well as the corresponding rating agency outlooks, are set out in the Financial Capital section of this MD&A.
Credit ratings are subject to revision or withdrawal at any time by the rating organization and there can be no
assurance that TransAlta’s credit ratings and the corresponding outlook will not be changed, resulting in the
adverse possible impacts identified above.
As at Dec. 31, 2022, we had liquidity of $2.1 billion comprising amounts not drawn under our committed credit
facilities and cash on hand net of bank overdraft.
TransAlta Corporation • 2022 Integrated Report
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MANAGEMENT'S DISCUSSION AND ANALYSIS
We manage liquidity risk by:
•
•
Preparing and revising longer-term financing plans to reflect changes in business plans and the
market availability of capital;
Reporting liquidity risk exposure and risk management activities on a regular basis to the Commodity
Risk & Compliance Committee, senior management and the AFRC;
• Maintaining a strong balance sheet;
• Maintaining sufficient undrawn committed credit lines to support potential liquidity requirements; and
• Monitoring trading positions.
Interest Rate Risk
Changes in interest rates can impact our borrowing costs. Changes in our cost of capital may also affect the
feasibility of new growth initiatives.
We manage interest rate risk by establishing and adhering to policies that include:
•
Employing a combination of fixed and floating rate debt instruments;
• Monitoring the mixture of floating and fixed rate debt and adjusting to ensure efficiency; and
• Opportunistically hedging probable debt issuances and outstanding variable rate borrowings using
interest rate swaps.
At Dec. 31, 2022, approximately nine per cent (2021 – three per cent) of our total long-term debt was subject
to changes in floating interest rates through a combination of floating rate debt and interest rate swaps.
The sensitivity of changes in interest rates upon our net earnings is shown below:
Factor
Interest rate
Increase or
decrease (Per cent)
Approximate impact
on net earnings (million)
50 bps
$1
London Interbank Offered Rate reform could impact interest rate risk with respect to the Company's Canadian
dollar credit facilities and the Poplar Creek non-recourse bond held by a TransAlta subsidiary. The facilities
reference the Canadian Dollar Offer Rate ("CDOR") for Canadian-dollar drawings. In addition, the non-
recourse bond references the three-month CDOR. Cessation of the three-month CDOR will occur on June 28,
2024, which will impact the facilities and the non-recourse bond.
Coal Supply Risk
Having sufficient fuel available when required for generation is essential to maintaining our ability to produce
electricity under contracts and for merchant sale opportunities. At Centralia, interruptions at our supplier’s
mine, the availability of trains to deliver coal and the financial viability of our coal suppliers could affect our
ability to generate electricity.
We manage coal supply risk by:
•
Sourcing the coal used at Centralia from different mine sources to ensure sufficient coal is available
at a competitive cost;
• Contracting sufficient trains to deliver the coal requirements at Centralia;
•
•
Ensuring coal inventories on hand at Centralia are at appropriate levels for usage requirements;
Ensuring efficient coal handling and storage facilities are in place so that the coal being delivered can
be processed in a timely and efficient manner;
• Monitoring and maintaining coal specifications and carefully matching the specifications mined with
the requirements of our facilities;
• Monitoring the financial viability of Centralia suppliers; and
• Hedging diesel exposure in mining and transportation costs.
TransAlta Corporation • 2022 Integrated Report
M128
MANAGEMENT'S DISCUSSION AND ANALYSIS
Project Management Risk
On capital projects, we face risks associated with cost overruns, delays and performance.
We manage project risks by:
•
•
•
Ensuring all projects follow established corporate processes and policies;
Identifying key risks during every stage of project development and ensuring mitigation plans are
factored into capital estimates and contingencies;
Reviewing project plans, key assumptions and returns with senior management prior to Board of
Director approvals;
• Consistently applying project management methodologies and processes;
• Determining contracting strategies that are consistent with the project scope and scale to ensure key
risks, such as labour and technology, are managed by contractors and equipment suppliers;
•
•
Ensuring contracts for construction and major equipment include key terms for performance, delays
and quality backed by appropriate levels of liquidated damages;
Reviewing projects after achieving commercial operation to ensure learnings are incorporated into
the next project;
• Negotiating contracts for construction and major equipment to lock in key terms such as price,
availability of long lead equipment, foreign currency rates and warranties as much as is economically
feasible before proceeding with the project; and
•
Entering into labour agreements to provide security around labour cost, supply and productivity.
Human Resource Risk
Human resource risk relates to the potential impact upon our business as a result of changes in the
workplace. Human resource risk can occur in several ways:
•
•
•
•
•
Potential disruption as a result of labour action at our generating facilities;
Reduced productivity due to turnover in positions;
Inability to complete critical work due to vacant positions;
Failure to maintain fair compensation with respect to market rate changes; and
Reduced competencies due to insufficient training, failure to transfer knowledge from existing
employees or insufficient expertise within current employees.
We manage this risk by:
•
•
Possessing a labour relations strategy;
Applying a human-centric approach that emphasizes the employee experience, including actively
improving our workplace culture, focusing on ED&I strategies and offering health and wellness
programming and initiatives;
•
Focusing on employee learning and development;
• Monitoring industry compensation and aligning salaries with those benchmarks;
• Using incentive pay to align employee goals with corporate goals;
• Monitoring and managing target levels of employee turnover; and
•
Ensuring employees have the appropriate training and qualifications to perform their jobs.
In 2022, approximately 31 per cent (2021 – 33 per cent) of our labour force was covered by 11 collective
bargaining agreements (2021 – 11). In 2022, we successfully renegotiated six (2021 – one) collective
bargaining agreements. Of these six agreements, three agreements are for a five-year duration, one
agreement is for a four-year duration, one agreement is for a three-year duration and one agreement is a
one-year duration. We expect to renegotiate three collective bargaining agreements in 2023. Any problems in
negotiating these collective bargaining agreements could lead to higher employee costs and a work stoppage
or strike, which could have a material adverse effect on us.
TransAlta Corporation • 2022 Integrated Report
M129
MANAGEMENT'S DISCUSSION AND ANALYSIS
Regulatory and Political Risk
Regulatory and political risk is the risk to our business associated with potential changes to the existing
regulatory structures and the political influence upon those structures within each of the jurisdictions in which
we operate. This risk can come from market regulation and re-regulation, increased oversight and control,
structural or design changes in markets, or other unforeseen influences. Market rules are often dynamic and
we are not able to predict whether there will be any material changes in the regulatory environment or the
ultimate effect of changes in the regulatory environment on our business. This risk includes, among other
things, uncertainties associated with the development of carbon pricing policies and funding.
We manage these risks systematically through our legal and regulatory groups and our compliance program,
which is reviewed periodically to ensure its effectiveness. We also work with governments, regulators,
electricity system operators and other stakeholders to resolve issues as they arise. We are actively
monitoring changes to market rules and market design and we engage in industry and government-agency-
led stakeholder engagement processes. Through these and other avenues, we engage in advocacy and
policy discussions at a variety of levels. These stakeholder consultations have allowed us to engage in
proactive discussions with governments and regulatory agencies over the longer term.
International investments are subject to unique risks and uncertainties relating to the political, social and
economic structures of the respective country and such country’s regulatory regime. We mitigate this risk
through the use of non-recourse financing and insurance.
Transmission Risk
Access to transmission lines and transmission capacity for existing and new generation is key to our ability to
deliver energy produced at our power facilities to our customers. The risks associated with the aging existing
transmission infrastructure in markets in which we operate continue to increase because new connections to
the power system are consuming transmission capacity faster than it is being added by new transmission
developments.
Reputation Risk
Our reputation is one of our most valued assets. Reputation risk relates to the risk associated with our
business because of changes in opinion from the general public, private stakeholders, governments and other
entities.
We manage reputation risk by:
•
Striving as a neighbour and business partner, in the regions where we operate, to build viable
relationships based on mutual understanding leading to workable solutions with our neighbours and
other community stakeholders;
• Clearly communicating our business objectives and priorities to a variety of stakeholders on a routine
and transparent basis;
•
Applying innovative technologies to improve our operations, work environment and environmental
footprint;
• Maintaining positive relationships with various levels of government;
•
•
Pursuing sustainable development as a longer-term corporate strategy;
Ensuring that each business decision is made with integrity and in line with our corporate values;
• Communicating the impact and rationale of business decisions to stakeholders in a timely manner;
and
• Maintaining strong corporate values that support reputation risk management initiatives, including
the annual Code of Conduct sign-off.
Corporate Structure Risk
We conduct a significant amount of business through subsidiaries and partnerships. Our ability to meet and
service debt obligations is dependent upon the results of operations of our subsidiaries and partnerships and
the payment of funds by our subsidiaries and partnerships in the form of distributions, loans, dividends or
otherwise. In addition, our subsidiaries and partnerships may be subject to statutory or contractual
restrictions that limit their ability to distribute cash to us.
TransAlta Corporation • 2022 Integrated Report
M130
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cybersecurity Risk
We rely on our information technology to process, transmit and store electronic information and data used for
the safe operation of our assets. Over the past few years, geopolitical tensions and the pandemic have
significantly impacted the cybersecurity ecosystem, increasing the frequency and diversity of cyberattacks,
including threats of war driven cyberattacks (i.e., terrorism) against critical infrastructure and threat actors
taking advantage of the pandemic (e.g., charity scams) and hybrid working environments. We anticipate the
cyber threat landscape to continue evolving, increasing threats of ransomware, compromised insider threats,
supply chain attacks, advanced targeted phishing and artificial intelligence.
Cyber threats originate from various sources and vectors, from nation states, organized hacking groups or
malware/ransomware. The cyber threat landscape continues to evolve, as we see cyber threats shift their
focus from traditional attacks against perimeter information technology systems, to more effective attacks,
such as phishing and ransomware.
TransAlta has established a comprehensive cybersecurity program, forming the foundation to implement
effective security practices, comprising of structured and tailored plans to manage cybersecurity risks. As
information technology /operation technology systems are integral to TransAlta’s business operations, the
risk of a cybersecurity incident threatens the safety of the public, TransAlta personnel and/or business
functions, service delivery, reputation and profitability.
TransAlta maintains compliance to regulatory, legislative, and business requirements (e.g. NERC CIP, SOX,
Privacy) by adopting industry endorsed standards and frameworks (e.g., National Institute of Standards and
Technology (“NIST”), CIP/Reliability Standards) to implement a pragmatic fit-for-purpose cybersecurity
program, implementing cybersecurity controls and processes under the following domains:
•
•
Identify: TransAlta conducts comprehensive risk assessments to identify and document the
organization's assets, systems and data, as well as potential risks and vulnerabilities.
Protect: TransAlta implements security controls, policies and procedures to safeguard the
organization's assets, systems and data from unauthorized access, use, disclosure, disruption,
modification or destruction. This includes implementing access controls, encryption, firewalls and
intrusion detection/prevention systems to protect the organization's networks and systems.
• Detect: TransAlta implements incident detection and response capabilities to detect and respond to
cyber incidents. This includes monitoring systems, networks and data for suspicious activity.
•
•
Respond: TransAlta has developed incident response plans, procedures and teams, as well as
provided training and conducted exercises to ensure that these plans and procedures are operating
effectively.
Recover: TransAlta has developed disaster recovery and business continuity plans, and it conducts
test exercises of these plans to ensure their effectiveness. This includes identifying critical systems,
data and process to ensure the continuity of business operations, as well as implementing backup
and recovery solutions to ensure that the organization's data can be restored in the event of a
disaster.
Although complete cyber risk elimination is not achievable given the evolving cyber threat landscape, the
security controls implemented to detect, prevent and respond to a cyber incident significantly reduce
TransAlta’s cyber risk and potential incident impact to acceptable levels. In addition, cyber insurance is
utilized to further manage and transfer residual cyber risk to TransAlta’s business. We continue to improve our
overall security maturity and defense capabilities against cyber threats and align cybersecurity practices to
industry standards, business objectives and regulatory compliance requirements.
TransAlta Corporation • 2022 Integrated Report
M131
MANAGEMENT'S DISCUSSION AND ANALYSIS
General Economic Conditions
Changes in general economic conditions impact product demand, revenue, operating costs, the timing and
extent of capital expenditures, the net recoverable value of PP&E, financing costs, credit and liquidity risk and
counterparty risk.
Growth Risk
Our business plan includes growth by making suitable acquisitions or contracting new build opportunities.
There can be no assurance that we will be able to identify attractive growth opportunities in the future, that
we will be able to complete growth opportunities that increase the amount of cash available for distribution,
or that growth opportunities will be successfully integrated into our existing operations. The successful
execution of the growth strategy requires careful timing and business judgment, as well as the resources to
complete the due diligence and evaluation of such opportunities and to acquire and successfully integrate
those assets into our business.
Income Taxes
Our operations are complex and located in several countries. The computation of the provision for income
taxes involves tax interpretations, regulations and legislation that are constantly evolving. Our tax filings are
subject to audit by taxation authorities. Management believes that it has adequately provided for income
taxes as required by the Income Tax Act and IFRS, based on all information currently available.
The Company is subject to changing laws, treaties and regulations in and between countries. Various tax
proposals in the countries we operate in could result in changes to the basis on which deferred taxes are
calculated or could result in changes to income or non-income tax expense. There has recently been an
increased focus on issues related to the taxation of multinational corporations. A change in tax laws, treaties
or regulations, or in the interpretation thereof, could result in a materially higher income or non-income tax
expense that could have a material adverse impact on the Company.
The sensitivity of changes in income tax rates upon our net earnings is shown below:
Factor
Tax rate
Increase or
decrease (Per cent)
Approximate impact
on net earnings (million)
1
$4
Legal Contingencies
We are occasionally named as a party in various disputes, claims and legal or regulatory proceedings that
arise during the normal course of our business. We review each of these claims, including the nature and
merits of the claim, the amount in dispute or the remedy claimed and the availability of insurance coverage.
There can be no assurance that any particular dispute, claim or proceeding will be resolved in our favour or
our liabilities with respect to such claims will not have a material adverse effect on us or our business,
operations or financial results. Refer to the Other Consolidated Analysis section of this MD&A for further
details.
Other Contingencies
We maintain a level of insurance coverage deemed appropriate by management. During renewal of the
insurance policies on Dec. 31, 2021, a coverage restriction was added for losses resulting from a foundation
failure at the Kent Hills 1 and 2 wind facilities only. There were no other significant changes to our insurance
coverage during renewal of the insurance policies on Dec. 31, 2022. Our insurance coverage may not be
available in the future on commercially reasonable terms. There can be no assurance that our insurance
coverage will be fully adequate to compensate for potential losses incurred. In the event of a significant
economic event, the insurers may not be capable of fully paying all claims. All insurance policies are subject to
standard exclusions.
TransAlta Corporation • 2022 Integrated Report
M132
MANAGEMENT'S DISCUSSION AND ANALYSIS
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting
(‘‘ICFR’’) and disclosure controls and procedures (“DC&P’’). For the year ended Dec. 31, 2022, the majority of
our workforce supporting and executing our ICFR and DC&P returned to work and continue to work remotely
on a hybrid basis. The Company has implemented appropriate controls and oversight for both in-office and
remote work. There has been minimal impact to the design and performance of our internal controls.
ICFR is a framework designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the consolidated financial statements for external purposes in accordance with IFRS.
Management has used the Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) in order to assess the effectiveness of the
Company’s ICFR.
DC&P refer to controls and other procedures designed to ensure that information required to be disclosed in
the reports we file or submit under securities legislation is recorded, processed, summarized and reported
within the time frame specified in applicable securities legislation. DC&P include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by us in our reports that we file
or submit under applicable securities legislation is accumulated and communicated to management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding our
required disclosure.
Together, the ICFR and DC&P frameworks provide internal control over financial reporting and disclosure. In
designing and evaluating our ICFR and DC&P, management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives and as such may not prevent or detect all misstatements and management is required to
apply its judgment in evaluating and implementing possible controls and procedures. Further, the
effectiveness of ICFR is subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with policies or procedures may change.
Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer,
the effectiveness of our ICFR and DC&P as of the end of the period covered by this MD&A. Based on the
foregoing evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as at Dec.
31, 2022, the end of the period covered by this MD&A, our ICFR and DC&P were effective.
TransAlta Corporation • 2022 Integrated Report
M133
Consolidated Financial Statements
Management's Report
To the Shareholders of TransAlta Corporation
The Consolidated Financial Statements and other financial information included in this annual report have
been prepared by management. It is management’s responsibility to ensure that sound judgment, appropriate
accounting principles and methods, and reasonable estimates have been used to prepare this information.
They also ensure that all information presented is consistent.
Management is also responsible for establishing and maintaining internal controls and procedures over the
financial reporting process. The internal control system includes an internal audit function and an established
business conduct policy that applies to all employees. In addition, TransAlta Corporation ("TransAlta") has a
code of conduct that applies to all employees and is signed annually. The Corporate Code of Conduct can be
viewed on TransAlta’s website (www.transalta.com). Management believes the system of internal controls,
review procedures and established policies provides reasonable assurance as to the reliability and relevance
of financial reports. Management also believes that TransAlta’s operations are conducted in conformity with
the law and with a high standard of business conduct.
The Board of Directors (the “Board”) is responsible for ensuring that management fulfils its responsibilities for
financial reporting and internal controls. The Board carries out its responsibilities principally through its Audit,
Finance and Risk Committee (the “Committee”). The Committee, which consists solely of independent
directors, reviews the financial statements and annual report and recommends them to the Board for
approval. The Committee meets with management, internal auditors and external auditors to discuss internal
controls, auditing matters and financial reporting issues. Internal and external auditors have full and
unrestricted access to the Committee. The Committee also recommends the firm of external auditors to be
appointed by the shareholders.
John Kousinioris
Todd Stack
President and Chief Executive Officer
Executive Vice President, Finance and
Chief Financial Officer
February 22, 2023
TransAlta Corporation • 2022 Integrated Report F1
Consolidated Financial Statements
Management’s Annual Report on Internal Control Over Financial Reporting
To the Shareholders of TransAlta Corporation
The following report is provided by management in respect of TransAlta Corporation’s (“TransAlta”) internal
control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the United States Securities
Exchange Act of 1934 and National Instrument 52-109 Certification of Disclosure in Issuers' Annual and
Interim Filings).
TransAlta’s management is responsible for establishing and maintaining adequate internal control over
financial reporting for TransAlta.
Management has used the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
2013 framework to evaluate the effectiveness of TransAlta’s internal control over financial reporting.
Management believes that the COSO 2013 framework is a suitable framework for its evaluation of TransAlta’s
internal control over financial reporting because it is free from bias, permits reasonably consistent qualitative
and quantitative measurements of TransAlta’s internal controls, is sufficiently complete so that those relevant
factors that would alter a conclusion about the effectiveness of TransAlta’s internal controls are not omitted
and is relevant to an evaluation of internal control over financial reporting.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting
objectives because of its inherent limitations. Internal controls over financial reporting are processes that
involve human diligence and compliance and are subject to lapses in judgment and breakdowns resulting
from human failures. Internal control over financial reporting also can be circumvented by collusion or
improper overrides. Because of such limitations, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial reporting. However, these inherent
limitations are known features of the financial reporting process and it is possible to design safeguards into
the process to reduce, though not eliminate, this risk.
TransAlta proportionately consolidates the joint operations of the Sheerness Generating Station and equity
accounts for our investment in SP Skookumchuck Investment, LLC in accordance with International Financial
Reporting Standards. Management does not have the contractual ability to assess the internal controls of
these joint arrangements and associates. Once the financial information is obtained from these joint
arrangements and associates it falls within the scope of TransAlta’s internal controls framework.
Management’s conclusion regarding the effectiveness of internal controls does not extend to the internal
controls at the transactional level of these joint arrangements and associates.
Included in the 2022 Consolidated Financial Statements of TransAlta for joint operations and equity
accounted investments are 4 per cent and 17 per cent of the Company's total and net assets, respectively, as
of Dec. 31, 2022, and 9 per cent of the Company's revenues.
TransAlta Corporation • 2022 Integrated Report F2
Changes in Internal Controls over Financial Reporting
There has been no change in the Company's internal control over financial reporting that occurred during the
year covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
Management has assessed the effectiveness of TransAlta’s internal control over financial reporting, as at Dec.
31, 2022 and has concluded that such internal control over financial reporting are effective.
Ernst & Young LLP, who has audited the consolidated financial statements of TransAlta for the year ended
Dec. 31, 2022, has also issued a report on internal control over financial reporting under the standards of the
Public Company Accounting Oversight Board (United States). This report is located on the following page of
this Annual Report.
John Kousinioris
Todd Stack
President and Chief Executive Officer
Executive Vice President, Finance and
Chief Financial Officer
February 22, 2023
TransAlta Corporation • 2022 Integrated Report F3
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of TransAlta Corporation
Opinion on Internal Control Over Financial Reporting
We have audited TransAlta Corporation’s internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our
opinion, TransAlta Corporation (the “Company”) maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2022, based on the COSO criteria.
As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting
did not include the internal controls of the joint operations of the Sheerness Generating Station and equity
accounted joint venture of SP Skookumchuck Investment, LLC which are included in the 2022 consolidated
financial statements of the Company and constituted 4% and 17% of total and net assets, respectively, as of
December 31, 2022, and 9% of revenues for the year then ended. Our audit of internal control over financial
reporting of the Company also did not include an evaluation of the internal control over financial reporting of
the joint operations of the Sheerness Generating Station and equity accounted joint venture of SP
Skookumchuck Investment, LLC.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated statements of financial position of TransAlta Corporation as of
December 31, 2022 and 2021, and the related consolidated statements of earnings (loss), comprehensive
loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2022,
and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
consolidated financial statements.
TransAlta Corporation • 2022 Integrated Report F4
CONSOLIDATED FINANCIAL STATEMENTS
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/Ernst & Young LLP
Chartered Professional Accountants
Calgary, Canada
February 22, 2023
TransAlta Corporation • 2022 Integrated Report F5
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of TransAlta Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of TransAlta Corporation
(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of earnings (loss),
comprehensive loss, changes in equity and cash flows, for each of the three years in the period ended
December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements“).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2022 and 2021, and the financial performance and its cash flows
for each of the three years in the period ended December 31, 2022, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2023
expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company‘s management. Our
responsibility is to express an opinion on the Company‘s consolidated financial statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
TransAlta Corporation • 2022 Integrated Report F6
CONSOLIDATED FINANCIAL STATEMENTS
Valuation of Long-Lived Assets related to certain cash generating units (“CGU”s) within the Wind & Solar segment and
the Hydro segment and Goodwill related to the Wind & Solar segment
Description of
the Matter
As disclosed in notes 2(G), 2(H), 2(P)(I), 7 and 22 of the consolidated financial statements, the Company
owns significant Wind & Solar and Hydro generation assets and has recognized goodwill from historical
acquisitions which must be tested for impairment at least annually or when indicators are present. The
carrying value of Goodwill related to the Wind & Solar segment was $176 million and the carrying value of
long-lived assets in the Wind & Solar segment and the Hydro segment that had indicators of impairment
was $748 million and $88 million respectively as at December 31, 2022.
How We
Addressed the
Matter in Our
Audit
Determining the recoverable amounts for the Wind & Solar segment for the purposes of the goodwill
impairment test and of certain CGUs in the Wind & Solar segment and Hydro segment with indicators of
impairment (“Wind & Solar CGUs” and “Hydro CGUs”) for the asset impairment test was identified as a
critical audit matter due to the significant estimation uncertainty and judgment applied by management in
determining the recoverable amount, primarily due to the sensitivity of the significant assumptions to the
future cash flows and the effect that changes in these assumptions would have on the recoverable
amount. The estimates with a high degree of subjectivity include electricity production, sales prices, cost
inputs, and determining the appropriate discount rate.
We obtained an understanding of management’s process for estimating the recoverable amount of the
Wind & Solar segment and the Wind & Solar CGUs and Hydro CGUs. We evaluated the design and tested
the operating effectiveness of controls over the Company’s processes to determine the recoverable
amount. Our audit procedures to test the Company’s recoverable amount of the Wind & Solar segment
and the Wind & Solar CGUs and Hydro CGUs with indicators of impairment included, among others,
comparing the significant assumptions used to estimate cash flows to current contracts with external
parties and historical trends and obtaining historical electricity generation data to evaluate future
electricity production forecasts. We assessed the historical accuracy of management’s forecasts by
comparing them with actual results and performed a sensitivity analysis to evaluate the assumptions that
were most significant to the determination of the recoverable amount. We evaluated the Company’s
determination of future sales prices by comparing them to externally available third-party future electricity
price estimates. We also involved our internal valuation specialist to assist in our evaluation of the
discount rates, which involved benchmarking the inputs against available market data.
Valuation of Level III Derivative Instruments
Description of
the Matter
As disclosed in notes 2(P)(IV), 14 and 26 of the consolidated financial statements, the Company enters
into transactions that are accounted for as derivative financial instruments and are recorded at fair value.
The valuation of derivative instruments classified as level III are determined using assumptions that are
not readily observable. As at December 31, 2022 the fair value of the Company’s derivative financial
instruments classified as level III was $782 million net risk management liability.
How We
Addressed the
Matter in Our
Audit
Auditing the determination of fair value of level III derivative instruments that rely on significant
unobservable inputs can be complex and relies on judgments and estimates concerning future prices,
discount rates, volatility, credit value adjustments, liquidity and delivery volumes, and can fluctuate
significantly depending on market conditions. Therefore, such determination of fair value was identified as
a critical audit matter.
We obtained an understanding of the Company’s processes and we evaluated and tested the design and
operating effectiveness of internal controls addressing the determination and review of inputs used in
establishing level III fair values. Our audit procedures included, among others, testing a sample of level III
derivative instrument internal models used by management and evaluating the significant assumptions
utilized. We also compared management's future pricing assumptions, credit value adjustments, and
liquidity assumptions to third-party data as well as comparing terms such as delivery volumes and timing
to executed commodity contracts. We compared the delivery volume assumptions to historical
information. We performed a sensitivity analysis to evaluate assumptions including future commodity
prices, delivery volumes and discount rates. For a sample of level III derivative instruments, we involved
our internal valuation specialist to assist in our evaluation of the appropriateness of the fair value by
evaluating the key assumptions and methodologies.
/s/Ernst & Young LLP
Chartered Professional Accountants
We have served as auditors of TransAlta Corporation and its predecessor entities since 1947.
Calgary, Canada
February 22, 2023
TransAlta Corporation • 2022 Integrated Report F7
Consolidated Statements of Earnings (Loss)
(in millions of Canadian dollars except where noted)
Year ended Dec. 31
Revenues (Note 5)
Fuel and purchased power (Note 6)
Carbon compliance
Gross margin
Operations, maintenance and administration (Note 6)
Depreciation and amortization
Asset impairment charges (Note 7)
Taxes, other than income taxes
Net other operating (income) loss (Note 8)
Operating income (loss)
Equity income (Note 9)
Finance lease income
Net interest expense (Note 10)
Foreign exchange gain
Gain on sale of assets and other (Note 18)
Earnings (loss) before income taxes
Income tax expense (recovery) (Note 11)
Net earnings (loss)
Net earnings (loss) attributable to:
TransAlta shareholders
Non-controlling interests (Note 12)
Net earnings (loss) attributable to TransAlta shareholders
Preferred share dividends (Note 29)
Net earnings (loss) attributable to common shareholders
CONSOLIDATED FINANCIAL STATEMENTS
2022
2021
2020
2,976
1,263
78
2,721
2,101
1,054
178
805
163
1,635
1,489
1,133
521
599
9
33
(58)
531
9
19
511
529
648
32
8
(239)
9
25
472
654
84
33
(11)
(99)
1
7
(262)
(245)
(238)
4
52
353
192
161
50
111
161
50
46
4
16
54
17
9
(380)
(303)
45
(50)
(425)
(253)
(537)
(287)
112
34
(425)
(253)
(537)
(287)
39
49
(576)
(336)
Weighted average number of common shares outstanding in the year (millions)
271
271
275
Net earnings (loss) per share attributable to common shareholders, basic and
diluted (Note 28)
See accompanying notes.
0.01
(2.13)
(1.22)
TransAlta Corporation • 2022 Integrated Report F8
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Loss
(in millions of Canadian dollars)
Year ended Dec. 31
Net earnings (loss)
Other comprehensive loss
2022
161
2021
2020
(425)
(253)
Net actuarial gains (losses) on defined benefit plans, net of tax(1)
Fair value losses on third-party investments, net of tax (Note 9)
Losses on derivatives designated as cash flow hedges, net of tax
Total items that will not be reclassified subsequently to net earnings (loss)
Gains (losses) on translating net assets of foreign operations, net of tax
Gains (losses) on financial instruments designated as hedges of foreign
operations, net of tax(2)
Gains (losses) on derivatives designated as cash flow hedges, net of tax(3)
Reclassification of losses (gains) on derivatives designated as cash flow hedges
to net earnings (loss), net of tax(4)
37
(1)
—
36
21
(25)
37
—
—
37
(14)
—
(556)
(200)
100
(8)
Total items that will be reclassified subsequently to net earnings (loss)
(460)
(222)
(11)
—
(1)
(12)
(11)
11
20
(110)
(90)
(102)
(355)
Other comprehensive loss
Total comprehensive loss
Total comprehensive income (loss) attributable to:
TransAlta shareholders
Non-controlling interests (Note 12)
(424)
(263)
(185)
(610)
(318)
(693)
(439)
55
83
84
(263)
(610)
(355)
(1) Net of income tax expense of $12 million for the year ended Dec. 31, 2022 (2021 – $11 million expense, 2020 – $3 million recovery).
(2) Net of income tax recovery of $3 million for the year ended Dec. 31, 2022 (2021 and 2020 – nil).
(3) Net of income tax recovery of $138 million for the year ended Dec. 31, 2022 (2021 – $55 million recovery, 2020 – $8 million expense).
(4) Net of reclassification of income tax expense of $26 million for the year ended Dec. 31, 2022 (2021 – $2 million recovery, 2020 – $31
million recovery).
See accompanying notes.
TransAlta Corporation • 2022 Integrated Report F9
Consolidated Statements of Financial Position
(in millions of Canadian dollars)
As at Dec. 31
Current assets
Cash and cash equivalents
Restricted cash (Note 25)
Trade and other receivables (Note 13)
Prepaid expenses
Risk management assets (Note 14 and 15)
Inventory (Note 16)
Assets held for sale (Note 18)
Non-current assets
Investments (Note 9)
Long-term portion of finance lease receivables (Note 17)
Risk management assets (Note 14 and 15)
Property, plant and equipment (Note 19)
Cost
Accumulated depreciation
Right-of-use assets (Note 20)
Intangible assets (Note 21)
Goodwill (Note 22)
Deferred income tax assets (Note 11)
Other assets (Note 23)
Total assets
Current liabilities
Bank overdraft (Note 14)
Accounts payable and accrued liabilities (Note 13)
Current portion of decommissioning and other provisions (Note 24)
Risk management liabilities (Note 14 and 15)
Current portion of contract liabilities
Income taxes payable
Dividends payable (Note 28 and 29)
Current portion of long-term debt and lease liabilities (Note 25)
Non-current liabilities
Credit facilities, long-term debt and lease liabilities (Note 25)
Exchangeable securities (Note 26)
Decommissioning and other provisions (Note 24)
Deferred income tax liabilities (Note 11)
Risk management liabilities (Note 14 and 15)
Contract liabilities
Defined benefit obligation and other long-term liabilities (Note 27)
Equity
Common shares (Note 28)
Preferred shares (Note 29)
Contributed surplus
Deficit
Accumulated other comprehensive income (loss) (Note 30)
Equity attributable to shareholders
Non-controlling interests (Note 12)
Total equity
Total liabilities and equity
Commitments and contingencies (Note 37)
See accompanying notes.
CONSOLIDATED FINANCIAL STATEMENTS
2022
2021
1,134
70
1,589
33
709
157
22
947
70
651
29
308
167
25
3,714
2,197
129
129
161
105
185
399
14,012
(8,456)
5,556
13,389
(8,069)
5,320
126
252
464
50
160
95
256
463
64
142
10,741
9,226
16
1,346
70
1,129
8
73
68
178
2,888
3,475
739
659
352
333
12
294
2,863
942
41
(2,514)
(222)
1,110
879
1,989
10,741
—
689
48
261
19
8
62
844
1,931
2,423
735
779
354
145
13
253
2,901
942
46
(2,453)
146
1,582
1,011
2,593
9,226
On behalf of the Board:
John P. Dielwart
Director
Bryan Pinney
Chair of Audit, Finance and Risk Committee
TransAlta Corporation • 2022 Integrated Report F10
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Changes in Equity
(in millions of Canadian dollars)
Common
shares
Preferred
shares
Contributed
surplus Deficit
Accumulated
other
comprehensive
income (loss)(1)
Attributable
to
shareholders
Attributable
to non-
controlling
interests
Total
Balance, Dec. 31, 2020
2,896
942
38 (1,826)
302
2,352
1,084 3,436
Net earnings (loss)
—
—
— (537)
—
(537)
112 (425)
Other comprehensive income
(loss):
Net losses on translating net
assets of foreign operations,
net of hedges and of tax
Net losses on derivatives
designated as cash flow
hedges, net of tax
Net actuarial gains on defined
benefits plans, net of tax
Intercompany FVTOCI
investments
Total comprehensive income
(loss)
Common share dividends
(Note 28)
Preferred share dividends
(Note 29)
Effect of share-based payment
plans (Note 31)
Distributions paid and payable,
to non-controlling interests
—
—
— —
(14)
(14)
—
(14)
—
—
— —
(208)
(208)
— (208)
—
—
— —
—
—
— —
37
29
37
—
37
29
(29) —
(537)
(156)
(693)
83 (610)
—
—
—
(51)
—
—
—
(39)
5
—
8 —
—
—
— —
—
—
—
—
(51)
—
(51)
(39)
—
(39)
13
—
13
—
(156) (156)
Balance, Dec. 31, 2021
2,901
942
46 (2,453)
146
1,582
1,011 2,593
Net earnings
—
—
—
50
—
50
111
161
Other comprehensive income
(loss):
Net losses on translating net
assets of foreign operations,
net of hedges and tax
Net losses on derivatives
designated as cash flow
hedges, net of tax
Net actuarial gains on defined
benefits plans, net of tax
Intercompany and third-party
FVTOCI investments
Total comprehensive income
(loss)
Common share dividends
(Note 28)
Preferred share dividends
(Note 29)
—
—
—
—
—
—
Shares purchased under NCIB
(Note 28)
(46)
Effect of share-based payment
plans (Note 31)
Distributions paid and payable,
to non-controlling interests
8
—
—
—
—
—
—
—
—
—
—
—
—
(4)
(4)
—
(4)
—
—
(456)
(456)
—
(456)
—
—
—
—
37
55
37
55
—
37
(56)
(1)
50
(368)
(318)
55
(263)
—
(57)
—
(46)
—
(8)
(5) —
—
—
—
—
—
—
—
(57)
—
(57)
(46)
—
(46)
(54)
—
(54)
3
—
—
3
(187) (187)
Balance, Dec. 31, 2022
2,863
942
41
(2,514)
(222)
1,110
879
1,989
(1) Refer to Note 30 for details on components of and changes in, accumulated other comprehensive income (loss).
See accompanying notes.
TransAlta Corporation • 2022 Integrated Report F11
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
(in millions of Canadian dollars)
Year ended Dec. 31
Operating activities
Net earnings (loss)
Depreciation and amortization (Note 38)
Net gain on sale of assets
Accretion of provisions (Note 10 and 24)
Decommissioning and restoration costs settled (Note 24)
Deferred income tax expense (recovery) (Note 11)
Unrealized (gain) loss from risk management activities
Unrealized foreign exchange (gain) loss
Provisions and contract liabilities
Asset impairment charges (Note 7)
Equity income, net of distributions from investments (Note 9)
Other non-cash items
Cash flow from operations before changes in working capital
Change in non-cash operating working capital balances (Note 34)
Cash flow from operating activities
Investing activities
Additions to property, plant and equipment (Note 19 and 38)
Additions to intangible assets (Note 21 and 38)
Restricted cash (Note 25)
Repayments (advances) in loan receivable (Note 23)
Acquisitions, net of cash acquired (Note 4 and 27)
Investments (Note 9)
Proceeds on sale of Pioneer Pipeline (Note 18)
Proceeds on sale of property, plant and equipment
Realized gain (loss) on financial instruments
Decrease in finance lease receivable
Other
Change in non-cash investing working capital balances
Cash flow used in investing activities
Financing activities
Net increase (decrease) in borrowings under credit facilities (Note 25 and 34)
Repayment of long-term debt (Note 25 and 34)
Issuance of long-term debt (Note 25 and 34)
Issuance of exchangeable securities (Note 26)
Dividends paid on common shares (Note 28)
Dividends paid on preferred shares (Note 29)
Repurchase of common shares under NCIB (Note 28)
Proceeds on issuance of common shares
Realized gains on financial instruments
2022
2021
2020
161
599
(32)
49
(35)
127
385
(82)
19
9
(4)
(3)
1,193
(316)
877
(918)
(31)
—
18
(10)
(10)
—
66
27
46
45
26
(425)
719
(54)
32
(18)
(11)
(34)
(24)
(41)
648
(5)
40
827
174
1,001
(253)
798
(9)
30
(18)
(85)
42
1
9
84
(1)
15
613
89
702
(480)
(486)
(9)
(1)
(3)
(120)
—
128
39
(6)
41
(16)
(45)
(741)
(472)
449
(621)
532
—
(54)
(43)
(52)
3
42
(114)
(92)
173
—
(48)
(39)
(4)
8
3
(14)
(39)
(5)
(32)
(102)
—
6
2
17
(12)
(22)
(687)
(106)
(489)
753
400
(47)
(39)
(57)
—
3
(97)
(25)
(11)
(13)
272
287
5
292
411
703
36
201
Distributions paid to subsidiaries' non-controlling interests (Note 12)
(187)
(156)
Decrease in lease liabilities (Note 25 and 34)
Financing fees and other
Change in non-cash financing working capital balances
Cash flow from (used in) financing activities
Cash flow from operating, investing and financing activities
Effect of translation on foreign currency cash
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash taxes paid
Cash interest paid
See accompanying notes.
(9)
(13)
(2)
45
181
6
187
947
1,134
67
229
(8)
(4)
(1)
(282)
247
(3)
244
703
947
57
220
TransAlta Corporation • 2022 Integrated Report F12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
(Tabular amounts in millions of Canadian dollars, except as otherwise noted)
1. Corporate Information
A. Description of the Business
TransAlta Corporation (“TransAlta” or the “Company”) was incorporated under the Canada Business
Corporations Act in March 1985. The Company became a public company in December 1992. The Company's
head office is located in Calgary, Alberta.
Operating Segments
Generation Segments
The four generation segments of the Company are as follows: Hydro, Wind and Solar, Gas, and Energy
Transition. The Company directly or indirectly owns and operates hydro, wind and solar, natural-gas-fired
facilities, a coal-fired facility and natural gas pipeline operations in Canada, the United States (“US”) and
Australia. The Wind and Solar segment includes the financial results, on a proportionate basis, of our
investment in SP Skookumchuck Investment, LLC ("Skookumchuck"). Segment revenues are derived from the
availability and production of electricity and steam as well as ancillary services.
Energy Marketing Segment
The Energy Marketing segment derives revenue and earnings from the wholesale trading of electricity and
other energy-related commodities and derivatives.
The Energy Marketing segment also performs services on behalf of certain assets outside of Alberta for the
power marketing of available generating capacity as well as the procurement of the fuel and transmission
needs of those assets by utilizing contracts of various durations for the forward sales of electricity and for the
purchase of natural gas and transmission capacity. The results of these power marketing activities are
included in the gross margin of each generation segment. The Energy Marketing segment allocates charges
to recognize the performance of these activities to the applicable generation segment thereto.
Corporate Segment
The Corporate segment includes the Company’s central finance, legal, administrative, corporate development,
and investor relations functions. Activities and charges directly or reasonably attributable to other segments
are allocated thereto. The Corporate segment includes our investment in EMG International, LLC ("EMG"), a
wastewater treatment processing company, which is accounted for using the equity method. Revenues are
derived from the design and construction of wastewater treatment facilities.
B. Basis of Preparation
These consolidated financial statements have been prepared by management in compliance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).
The consolidated financial statements have been prepared on a historical cost basis except for financial
instruments, which are measured at fair value, as explained in the following accounting policies.
These consolidated financial statements were authorized for issue by TransAlta's Board of Directors (the
"Board") on Feb. 22, 2023.
C. Basis of Consolidation
The consolidated financial statements include the accounts of the Company and the subsidiaries that it
controls. Control exists when the Company is exposed, or has rights, to variable returns from its involvement
with the subsidiary and has the ability to affect the returns through its power over the subsidiary. The
financial statements of the subsidiaries are prepared for the same reporting period and apply consistent
accounting policies as the parent company.
TransAlta Corporation • 2022 Integrated Report F13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Material Accounting Policies
The Company has reviewed its material accounting policies. The definition of material that management has
used to judgmentally determine disclosure is that information is material if omitting it or misstating it could
influence decisions users make on the basis of financial information.
A. Revenue Recognition
I. Revenue from Contracts with Customers
The majority of the Company’s revenues from contracts with customers are derived from the sale of
generation capacity, electricity, thermal energy, environmental attributes and byproducts of power
generation. The Company evaluates whether the contracts it enters into meet the definition of a contract with
a customer at the inception of the contract and on an ongoing basis if there is an indication of significant
changes in facts and circumstances. Contract modifications are accounted for as separate contracts when
the consideration for the additional promised goods reflects a stand-alone selling price. Otherwise, contract
modifications are accounted for as part of the existing contract. If the additional goods are not considered
distinct the transaction price can be affected and adjustments to previously recognized revenue can occur. If
the additional goods are distinct, the existing and modified contracts are treated together as a new contract,
with impacts reflected prospectively from the modification date. Revenue is measured based on the
transaction price specified in a contract with a customer. Revenue is recognized when control of the goods or
services are transferred to the customer. For certain contracts, revenue may be recognized at the invoiced
amount, as permitted using the invoice practical expedient, if such amount corresponds directly with the
Company’s performance to date. The Company excludes amounts collected on behalf of third parties from
revenue.
Performance Obligations
Each promised good or service is accounted for separately as a performance obligation if it is distinct. The
Company’s contracts may contain more than one performance obligation.
Transaction Price
The Company allocates the transaction price in the contract to each performance obligation. Transaction
price allocated to performance obligations may include variable consideration. Variable consideration is
included in the transaction price for each performance obligation when it is highly probable that a significant
reversal of the cumulative variable revenue will not occur. Variable consideration that has previously been
constrained is assessed at each reporting period to determine whether the constraint is lifted. The
consideration contained in some of the Company's contracts with customers is primarily variable and may
include both variability in quantity and pricing, such as: revenues can be dependent upon future production
volumes that are driven by customer or market demand or by the operational ability of the plant; revenues
can be dependent upon the variable cost of producing the energy; revenues can be dependent upon market
prices; and revenues can be subject to various indices and escalators.
When multiple performance obligations are present in a contract, the transaction price is allocated to each
performance obligation in an amount that depicts the consideration the Company expects to be entitled to in
exchange for transferring the good or service. The Company estimates the amount of the transaction price to
allocate to individual performance obligations based on their relative stand-alone selling prices, which is
primarily estimated based on the amounts that would be charged to customers under similar market
conditions.
TransAlta Corporation • 2022 Integrated Report
F14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Recognition
The nature, timing of recognition of satisfied performance obligations and payment terms for the Company’s
goods and services are described below:
Good or service
Capacity
Contract power
Thermal energy
Environmental
attributes
Description
Capacity refers to the availability of an asset to deliver goods or services.
Customers typically pay for capacity for each defined time period (e.g., monthly) in
an amount representative of the availability of the asset for the defined time
period. Obligations to deliver capacity are satisfied over time and revenue is
recognized using a time-based measure. Contracts for capacity are typically long
term in nature. Payments are typically received from customers on a monthly
basis.
The sale of contract power refers to the delivery of units of electricity to a
customer under the terms of a contract. Customers pay a contractually specified
price for the output at the end of predefined contractual periods (e.g., monthly).
Obligations to deliver electricity are satisfied over time and revenue is recognized
using a units-based output measure (i.e., megawatt hours). Contracts for power
are typically long term in nature and payments are typically received on a monthly
basis.
Thermal energy refers to the delivery of units of steam to a customer under the
terms of a contract. Customers pay a contractually specified price for the output at
the end of predefined contractual periods (e.g., monthly). Obligations to deliver
steam are satisfied over time and revenue is recognized using a units-based
output measure (i.e., gigajoules). Contracts for thermal energy are typically long
term in nature. Payments are typically received from customers on a monthly
basis.
Environmental attributes refers to the delivery of renewable energy certificates,
green attributes and other similar
for
environmental attributes in conjunction with the purchase of power, in which case
the customer pays for the attributes in the month subsequent to the delivery of the
power. Alternatively, customers pay upon delivery of the environmental attributes.
Obligations to deliver environmental attributes are satisfied at a point in time,
generally upon delivery of the item.
items. Customers may contract
Generation byproducts Generation byproducts refers to the sale of byproducts from the use of coal in the
Company’s US coal operations and the sale of coal to third parties. Obligations to
deliver byproducts are satisfied at a point in time, generally upon delivery of the
item. Payments are received upon satisfaction of delivery of the byproducts.
A contract liability is recorded when the Company receives consideration before the performance obligations
have been satisfied. A contract asset is recorded when the Company has rights to consideration for the
completion of a performance obligation before it has invoiced the customer. The Company recognizes
unconditional rights to consideration separately as a receivable. Contract assets and receivables are
evaluated at each reporting period to determine whether there is any objective evidence that they are
impaired.
II. Revenue from Other Sources
Merchant Revenue
Revenues from non-contracted capacity (i.e., merchant) comprise energy payments, at market price, for each
MWh produced and are recognized upon delivery.
TransAlta Corporation • 2022 Integrated Report
F15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Lease Revenue
In certain situations, a long-term electricity or thermal sales contract may contain, or be considered, a lease.
Revenues associated with non-lease elements are recognized as goods or services revenues as outlined
above. Where the terms and conditions of the contract result in the customer assuming the principal risks and
rewards of ownership of the underlying asset, the contractual arrangement is considered a finance lease,
which results in the recognition of finance lease income. Where the Company retains the principal risks and
rewards, the contractual arrangement is an operating lease. Rental income, including contingent rents where
applicable, is recognized over the term of the contract.
Revenue from Derivatives
Commodity risk management activities involve the use of derivatives such as physical and financial swaps,
forward sales contracts, futures contracts and options, which are used to earn revenues and to gain market
information. The Company also enters into contracts for differences and Virtual Power Purchase Agreements
("VPPA"). Contracts for differences are financial contracts whereby the Company receives a fixed price per
MWh and pays the prevailing real-time energy market price per MWh. A VPPA is whereby the Company
receives the difference between the fixed contract price per MWh and the settled market price. These
arrangements are option-based derivatives and judgment is applied to determine if the contract meets the
"own use" exemption or if derivative treatment is required.
These derivatives are accounted for using fair value accounting. The initial recognition and subsequent
changes in fair value affect reported net earnings in the period the change occurs and are presented on a net
basis in revenue. The fair values of instruments that remain open at the end of the reporting period represent
unrealized gains or losses and are presented on the Consolidated Statements of Financial Position as risk
management assets or liabilities. Some of the derivatives used by the Company in trading activities are not
traded on an active exchange or have terms that extend beyond the time period for which exchange-based
quotes are available. The fair values of these derivatives are determined using internal valuation techniques
or models.
B. Financial Instruments and Hedges
I. Financial Instruments
Classification and Measurement
IFRS 9 introduced the requirement to classify and measure financial assets based on their contractual cash
flow characteristics and the Company’s business model for the financial asset. All financial assets and
financial liabilities, including derivatives, are recognized at fair value on the Consolidated Statements of
Financial Position when the Company becomes party to the contractual provisions of a financial instrument or
non-financial derivative contract. Financial assets must be classified and measured at either amortized cost,
at fair value through profit or loss (“FVTPL”), or at fair value through other comprehensive income (loss)
(“FVTOCI”).
Financial assets with contractual cash flows arising on specified dates, consisting solely of principal and
interest and that are held within a business model whose objective is to collect the contractual cash flows,
are subsequently measured at amortized cost. Financial assets measured at FVTOCI are those that have
contractual cash flows, arising on specific dates, consisting solely of principal and interest and that are held
within a business model whose objective is to collect the contractual cash flows and to sell the financial asset
and investments in equity instruments. All other financial assets are subsequently measured at FVTPL.
Financial liabilities are classified as FVTPL when the financial liability is held for trading. All other financial
liabilities are subsequently measured at amortized cost.
Funds received under tax equity investment arrangements are classified as long-term debt. These
arrangements are used in the US where project investors acquire an equity investment in the project entity
and in return for their investment, are allocated substantially all of the earnings, cash flows and tax benefits
(such as production tax credits, investment tax credits, accelerated tax depreciation, as applicable) until they
have achieved the agreed upon target rate of return. Once achieved, the arrangements flip, with the
Company then receiving the majority of earnings, cash flows and tax benefits. At that time, the tax equity
financings will be classified as a non-controlling interest. In applying the effective interest method to tax
equity financings, the Company has made an accounting policy choice to recognize the impacts of the tax
attributes in net interest expense.
TransAlta Corporation • 2022 Integrated Report
F16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company enters into a variety of derivative financial instruments to manage its exposure to commodity
price risk, interest rate risk and foreign currency exchange risk, including fixed price financial swaps, long-
term physical power sale contracts, foreign exchange forward contracts and designating foreign currency
debt as a hedge of net investments in foreign operations.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is
recognized in net earnings immediately, unless the derivative is designated and effective as a hedging
instrument, in which case the timing of the recognition in net earnings is dependent on the nature of the
hedging relationship.
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of IFRS
9 (e.g., financial liabilities) are treated as separate derivatives when they meet the definition of a derivative,
their risks and characteristics are not closely related to those of the host contracts and the host contracts are
not measured at FVTPL. Derivatives embedded in hybrid contracts that contain financial asset hosts within
the scope of IFRS 9 are not separated and the entire contract is measured at either FVTPL or amortized cost,
as appropriate.
Financial assets are derecognized when the contractual rights to receive cash flows expire. Financial liabilities
are derecognized when the obligation is discharged, cancelled or expired.
Financial assets are also derecognized when the Company has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received cash flows to a third party under a "pass-
through" arrangement and either transferred substantially all the risks and rewards of the asset, or
transferred control of the asset. TransAlta will continue to recognize the asset and any associated liability if
TransAlta retains substantially all of the risks and rewards of the asset, or retains control of the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the maximum amount of consideration that TransAlta
could be required to repay.
Financial assets and financial liabilities are offset and the net amount is reported in the Consolidated
Statements of Financial Position if there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis or to realize the assets and settle the liabilities
simultaneously.
Transaction costs are expensed as incurred for financial instruments classified or designated as FVTPL. For
other financial instruments, such as debt instruments, transaction costs are recognized as part of the carrying
amount of the financial instrument. The Company uses the effective interest method of amortization for any
transaction costs or fees, premiums or discounts earned or incurred for financial instruments measured at
amortized cost.
Impairment of Financial Assets
TransAlta recognizes an allowance for expected credit losses for financial assets measured at amortized cost
as well as certain other instruments. The loss allowance for a financial asset is measured at an amount equal
to the lifetime expected credit loss if its credit risk has increased significantly since initial recognition or if the
financial asset is a purchased or originated credit-impaired financial asset. If the credit risk on a financial
asset has not increased significantly since initial recognition, its loss allowance is measured at an amount
equal to the 12-month expected credit loss.
For trade receivables, lease receivables and contract assets recognized under IFRS 15, TransAlta applies a
simplified approach for measuring the loss allowance. Therefore, the Company does not track changes in
credit risk but instead recognizes a loss allowance at an amount equal to the lifetime expected credit losses
at each reporting date.
The assessment of the expected credit loss is based on historical data and adjusted by forward-looking
information. Forward-looking information utilized includes third-party default rates over time, dependent on
credit ratings.
II. Hedges
Where hedge accounting can be applied and the Company chooses to seek hedge accounting treatment, a
hedge relationship is designated as a fair value hedge, a cash flow hedge or a hedge of foreign currency
exposures of a net investment in a foreign operation.
TransAlta Corporation • 2022 Integrated Report
F17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A relationship qualifies for hedge accounting if, at inception, it is formally designated and documented as a
hedge and the hedging instrument and the hedged item have values that generally move in opposite direction
because of the hedged risk. The documentation includes identification of the hedging instrument and hedged
item or transaction, the nature of the risk being hedged, the Company’s risk management objectives and
strategy for undertaking the hedge and how hedge effectiveness will be assessed. The process of hedge
accounting includes linking derivatives to specific recognized assets and liabilities or to specific firm
commitments or highly probable anticipated transactions.
The Company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the
derivatives used are highly effective in offsetting changes in fair values or cash flows of hedged items. If
hedge criteria are not met or the Company does not apply hedge accounting, the derivative is recognized at
fair value on the Consolidated Statements of Financial Position, with subsequent changes in fair value
recorded in net earnings in the period of change.
Fair Value Hedges
In a fair value hedging relationship, the carrying amount of the hedged item is adjusted for changes in fair
value attributable to the hedged risk, with the changes being recognized in net earnings. Changes in the fair
value of the hedged item, to the extent that the hedging relationship is effective, are offset by changes in the
fair value of the hedging derivative, which is also recorded in net earnings.
For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value is
amortized through profit or loss over the remaining term of the hedge using the effective interest rate ("EIR")
method. The EIR amortization may begin as soon as an adjustment exists and no later than when the hedged
item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss.
Cash Flow Hedges
In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging
derivative is recognized in other comprehensive income (loss) ("OCI") while any ineffective portion is
recognized in net earnings. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or
loss on the hedging instrument and the cumulative change in fair value of the hedged item.
If cash flow hedge accounting is discontinued, the amounts previously recognized in accumulated other
comprehensive income (loss) ("AOCI") must remain in AOCI if the hedged future cash flows are still expected
to occur. Otherwise, the amount will be immediately reclassified to net earnings as a reclassification
adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in AOCI must be
accounted for depending on the nature of the underlying transaction.
Hedges of Foreign Currency Exposures of a Net Investment in a Foreign Operation
In hedging of a foreign currency exposure of a net investment in a foreign operation, the effective portion of
foreign exchange gains and losses on the hedging instrument is recognized in OCI and the ineffective portion
is recognized in net earnings. The related fair values are recorded in risk management assets or liabilities, as
appropriate. The amounts previously recognized in AOCI are recognized in net earnings when there is a
reduction in the hedged net investment as a result of a disposal, partial disposal or loss of control.
C. Cash and Cash Equivalents
Cash and cash equivalents comprises cash and highly liquid investments with original maturities of three
months or less.
D. Inventory
I. Fuel
The Company’s inventory balance is composed of coal and natural gas used as fuel, which is measured at the
lower of weighted average cost and net realizable value. The cost of natural gas and purchased coal
inventory includes all applicable expenditures and charges incurred in bringing the inventory to its existing
condition and location.
II. Energy Marketing
Commodity inventories held in the Energy Marketing segment for trading purposes are measured at fair value
less costs to sell. Changes in fair value less costs to sell are recognized in net earnings in the period of
change.
TransAlta Corporation • 2022 Integrated Report
F18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
III. Parts, Materials and Supplies
Parts, materials and supplies are recorded at the lower of cost and measured at moving average costs and
net realizable value.
IV. Emission Credits and Allowances
Emission credits and allowances are recorded as inventory at cost. Those purchased for use by the Company
are recorded at cost and are carried at the lower of weighted average cost and net realizable value. For
emission credits that are not ordinarily interchangeable, the Company records the credits using the specific
identification method. Credits granted to, or internally generated by, TransAlta are recorded at nil. Emission
liabilities are recorded using the best estimate of the amount required by the Company to settle its obligation
in excess of government-established caps and targets. To the extent compliance costs are recoverable under
the terms of contracts with third parties, the amounts are recognized as revenue in the period of recovery.
Emission credits and allowances that are held for trading and that meet the definition of a derivative are
accounted for using the fair value method of accounting. Emission credits and allowances that do not satisfy
the criteria of a derivative are accounted for using the accrual method.
E. Property, Plant and Equipment
The Company’s investment in property, plant and equipment (“PP&E”) is initially measured at the original cost
of each component at the time of construction, purchase or acquisition. A component is a tangible portion of
an asset that can be separately identified and depreciated over its own expected useful life and is expected
to provide a benefit for a period in excess of one year. Original cost includes items such as materials, labour,
borrowing costs and other directly attributable costs, including the initial estimate of the cost of
decommissioning and restoration. Costs are recognized as PP&E if it is probable that future economic
benefits will be realized and the cost of the item can be measured reliably. The cost of major spare parts is
capitalized and classified as PP&E, as these items can only be used in connection with an item of PP&E.
Planned maintenance is performed at regular intervals. Planned major maintenance includes inspection, repair
and maintenance of existing components and the replacement of existing components. Costs incurred for
planned major maintenance activities are capitalized in the period maintenance activities occur and are
amortized on a straight-line basis over the term until the next major maintenance event. Expenditures
incurred for the replacement of components during major maintenance are capitalized and amortized over the
estimated useful life of such components.
The cost of routine repairs and maintenance and the replacement of minor parts is charged to net earnings as
incurred. Subsequent to initial recognition and measurement at cost, all classes of PP&E continue to be
measured using the cost model and are reported at cost less accumulated depreciation and impairment
losses, if any.
An item of PP&E or a component is derecognized upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on derecognition is included in net earnings when
the asset is derecognized. The estimate of the useful life of each component of PP&E is based on current
facts and past experience and takes into consideration existing long-term sales agreements and contracts,
current and forecasted demand and the potential for technological obsolescence. The useful life is used to
estimate the rate at which the component of PP&E is depreciated. PP&E assets are subject to depreciation
when the asset is considered to be available for use, which is typically upon commencement of commercial
operations. Insurance spares that are designated as critical for uninterrupted operation in a particular facility
are depreciated over the life of that facility, even if the item is not in service. Capital spares begin to be
depreciated when the item is put into service. Each significant component of an item of PP&E is depreciated
to its residual value over its estimated useful life, generally using straight-line or unit-of-production methods.
Estimated useful lives, residual values and depreciation methods are reviewed annually and are subject to
revision based on new or additional information. The effect of a change in useful life, residual value or
depreciation method is accounted for prospectively.
TransAlta Corporation • 2022 Integrated Report
F19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Estimated remaining useful lives of the components of depreciable assets, categorized by asset class, are as
follows:
Hydro generation
Wind and Solar generation
Gas generation
Energy Transition
Capital spares and other
2-50 years
2-30 years
2-35 years
1-10 years
2-50 years
TransAlta capitalizes borrowing costs on capital
in projects under construction. Upon
commencement of commercial operations, capitalized borrowing costs, as a portion of the total cost of the
asset, are depreciated over the estimated useful life of the related asset.
invested
F. Intangible Assets
Intangible assets acquired in a business combination are recognized separately from goodwill at their fair
value at the date of acquisition. Intangible assets acquired separately are recognized at cost. Internally
generated intangible assets arising from development projects are recognized when certain criteria related to
the feasibility of internal use or sale and probable future economic benefits of the intangible asset, are
demonstrated.
Intangible assets are initially recognized at cost, which is comprised of all directly attributable costs
necessary to create, produce and prepare the intangible asset to be capable of operating in the manner
intended by management.
Subsequent to initial recognition, intangible assets continue to be measured using the cost model and are
reported at cost less accumulated amortization and impairment losses, if any. Amortization is included in
depreciation and amortization in the Consolidated Statements of Earnings (Loss).
Amortization commences when the intangible asset is available for use and is computed on a straight-line
basis over the intangible asset’s estimated useful life. Estimated useful lives of intangible assets may be
determined, for example, with reference to the term of the related contract or licence agreement. The
estimated useful lives and amortization methods are reviewed annually with the effect of any changes being
accounted for prospectively.
Intangible assets consist of power sale contracts with fixed prices higher than market prices at the date of
acquisition, software and intangibles under development. Estimated remaining useful lives of intangible
assets are as follows:
Software
Power sale contracts
1-7 years
1-18 years
G. Impairment of Tangible and Intangible Assets Excluding Goodwill
At the end of each reporting period, the Company assesses whether there is any indication that PP&E and
finite life intangible assets are impaired.
Factors that could indicate that an impairment exists include: significant underperformance relative to
historical or projected operating results; significant changes in the manner in which an asset is used, or in the
Company’s overall business strategy; or significant negative industry or economic trends. In some cases,
these events are clear. However, in many cases, a clearly identifiable event indicating possible impairment
does not occur. Instead, a series of individually insignificant events occur over a period of time leading to an
indication that an asset may be impaired. This can be further complicated in situations where the Company is
not the operator of the facility. Events can occur in these situations that may not be known until a date
subsequent to their occurrence.
TransAlta Corporation • 2022 Integrated Report
F20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s operations, the market and business environment are routinely monitored and judgments and
assessments are made to determine whether an event has occurred that indicates a possible impairment. If
such an event has occurred, an estimate is made of the recoverable amount of the asset or cash-generating
unit (“CGU”) to which the asset belongs. Recoverable amount is the higher of an asset’s fair value less costs
of disposal and its value in use. Fair value is the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date. In determining fair value, recent market
transactions are taken into account. If no such transactions can be identified, an appropriate valuation model
such as discounted cash flows is used. Value in use is the present value of the estimated future cash flows
expected to be derived from the asset from its continued use and ultimate disposal by the Company. If the
recoverable amount is less than the carrying amount of the asset or CGU, an asset impairment charge is
recognized in net earnings and the asset’s carrying amount is reduced to its recoverable amount.
At each reporting date, an assessment is made whether there is any indication that an impairment charge
previously recognized may no longer exist or may have decreased. If such indication exists, the recoverable
amount of the asset or CGU to which the asset belongs is estimated and, if there has been an increase in the
recoverable amount, the impairment charge previously recognized is reversed. Where an impairment charge
is subsequently reversed, the carrying amount of the asset is increased to the lesser of the revised estimate
of its recoverable amount or the carrying amount that would have been determined (net of depreciation) had
no impairment charge been recognized previously. A reversal of an impairment charge is recognized in net
earnings.
H. Goodwill
Goodwill arising in a business combination is recognized as an asset at the date control is acquired. Goodwill
is measured as the cost of an acquisition plus the amount of any non-controlling interest in the acquiree (if
applicable) less the fair value of the related identifiable assets acquired and liabilities assumed.
Goodwill is not subject to amortization, but is tested for impairment at least annually, or more frequently, if an
analysis of events and circumstances indicates that a possible impairment may exist. These events could
include a significant change in financial position of the CGUs or groups of CGUs to which the goodwill relates
or significant negative industry or economic trends. For impairment purposes, goodwill is allocated to each of
the Company’s CGUs or groups of CGUs that are expected to benefit from the synergies of the business
combination in which the goodwill arose. Accordingly, the Company performs its test for impairment, where
the recoverable amount of the CGUs or groups of CGUs to which the goodwill relates is compared to its
carrying amount for each operating segment. If the recoverable amount is less than the carrying amount, an
impairment charge is recognized in net earnings immediately, by first reducing the carrying amount of the
goodwill and then by reducing the carrying amount of the other assets in the unit. An impairment charge
recognized for goodwill is not reversed in subsequent periods.
I. Income Taxes
The Company uses the liability method of accounting for income taxes. Under the liability method, deferred
income tax assets and liabilities are recognized on the differences between the carrying amounts of assets
and liabilities and their respective income tax basis (temporary differences). A deferred income tax asset may
also be recognized for the benefit expected from unused tax credits and losses available for carryforward, to
the extent that it is probable that future taxable earnings will be available against which the tax credits and
losses can be applied. Deferred income tax assets and liabilities are measured based on income tax rates and
tax laws that are enacted or substantively enacted by the end of the reporting period and that are expected
to apply in the years in which temporary differences are expected to be realized or settled. Deferred income
tax is charged or credited to net earnings, except when related to items charged or credited to either OCI or
directly to equity. The carrying amount of deferred income tax assets is evaluated at the end of each
reporting period and is reduced to the extent that it is no longer probable that sufficient taxable income will
be available to allow all or part of the asset to be realized. Unrecognized deferred tax assets are re-assessed
at each reporting date and are recognised to the extent that it has become probable that future taxable
income will allow the deferred income tax asset to be recovered.
Deferred income tax liabilities are recognized for taxable temporary differences arising on investments in
subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
Cash taxes paid disclosed on the Consolidated Statements of Cash Flows includes income taxes and taxes
paid related to the Part VI.1 tax in Canada for the period.
TransAlta Corporation • 2022 Integrated Report
F21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
J. Employee Future Benefits
The Company has defined benefit pension and other post-employment benefit plans. The current service
cost of providing benefits under the defined benefit plans is determined using the projected unit credit
method prorated based on service. The net interest cost is determined by applying the discount rate to the
net defined benefit liability. The discount rate used to determine the present value of the defined benefit
obligation and the net interest cost, is determined by reference to market yields at the end of the reporting
period on high-quality corporate bonds with terms and currencies that match the estimated terms and
currencies of the benefit obligations. Remeasurements, which include actuarial gains and losses and the
return on plan assets (excluding net interest), are recognized through OCI in the period in which they occur.
Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions.
Remeasurements are not reclassified to profit or loss, from OCI, in subsequent periods.
Gains or losses arising from either a curtailment or settlement of a defined benefit plan are recognized when
the curtailment or settlement occurs. When the restructuring of a benefit plan gives rise to a curtailment and a
settlement of obligations, the curtailment is accounted for prior to the settlement.
In determining whether statutory minimum funding requirements of the Company’s defined benefit pension
plans give rise to recording an additional liability, letters of credit provided by the Company as security are
considered to alleviate the funding requirements. No additional liability results in these circumstances.
Contributions payable under defined contribution pension plans are recognized as a liability and an expense
in the period in which the services are rendered.
K. Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required to settle the obligation and a reliable estimate can
be made of the amount of the obligation. A legal obligation can arise through a contract, legislation or other
operation of law. A constructive obligation arises from an entity’s actions whereby through an established
pattern of past practice, published policies or a sufficiently specific current statement, the entity has
indicated it will accept certain responsibilities and has thus created a valid expectation that it will discharge
those responsibilities. The amount recognized as a provision is the best estimate, remeasured at each period-
end, of the expenditures required to settle the present obligation, considering the risks and uncertainties
associated with the obligation. Where expenditures are expected to be incurred in the future, the obligation is
measured at its present value using a current market-based, risk-adjusted interest rate.
The Company records a decommissioning and restoration provision for all generating facilities and mine sites
for which it is legally or constructively required to remove the facilities at the end of their useful lives and
restore the plant or mine sites. For some hydro facilities, the Company is required to remove the generating
equipment, but is not required to remove the structures. Initial decommissioning provisions are recognized at
their present value when incurred. Each reporting date, the Company determines the present value of the
provision using the current discount rates that reflect the time value of money and associated risks. The
Company recognizes the initial decommissioning and restoration provisions, as well as changes resulting from
revisions to cost estimates and period-end revisions to the market-based, risk-adjusted discount rate, as a
cost of the related PP&E (see Note 2(E)) to the extent the related PP&E asset is still in use. Where the related
PP&E asset has reached the end of its useful life, changes in the decommissioning and restoration provision
are recognized in net earnings. The accretion of the net present value discount is charged to net earnings
each period and is included in net interest expense. Where the Company expects to receive reimbursement
from a third party for a portion of future decommissioning costs, the reimbursement is recognized as a
separate asset when it is virtually certain that the reimbursement will be received.
Changes in other provisions resulting from revisions to estimates of expenditures required to settle the
obligation or period-end revisions to the market-based, risk-adjusted discount rate are recognized in net
earnings. The accretion of the net present value discount is charged to net earnings each period and is
included in net interest expense.
TransAlta Corporation • 2022 Integrated Report
F22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
L. Leases
Under IFRS 16, a contract contains a lease when the customer obtains the right to control the use of an
identified asset for a period of time in exchange for consideration.
I. Lessee
The Company enters into lease arrangements with respect to land, building and office space, vehicles and
site machinery and equipment. For all contracts that meet the definition of a lease under IFRS 16 in which the
Company is the lessee and which are not exempt as short-term or low-value leases, the Company:
•
•
•
Recognizes right-of-use assets and lease liabilities in the Consolidated Statements of Financial
Position;
Recognizes depreciation of the right-of-use assets and interest expense on lease liabilities in the
Consolidated Statements of Earnings (Loss); and
Recognizes the principal repayments on lease liabilities as financing activities and interest payments
on lease liabilities as operating activities in the Consolidated Statements of Cash Flows.
For short-term and low-value leases, the Company recognizes the lease payments as operating expenses.
Variable lease payments that do not depend on an index or a rate are not included in the measurement of the
lease liability and the right-of-use asset and are recognized as an expense in the period in which the event or
condition that triggers the payments occurs.
Right-of-use assets are initially measured at an amount equal to the lease liability and adjusted for any
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset, or to restore the underlying asset or the site on which it
is located, less any lease incentives received.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at
commencement and discounted using the Company's incremental borrowing rate or the rate implicit in the
lease. The lease liability is remeasured when there is a change in future lease payments arising from a change
in an index or rate, or if there is a change in the Company’s estimate or assessment of whether it will exercise
an extension, termination or purchase option. A corresponding adjustment is made to the carrying amount of
the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has
been reduced to zero.
The lease term includes periods covered by an option to extend if the Company is reasonably certain to
exercise that option and periods covered by an option to terminate if the Company is reasonably certain not
to exercise that option.
Right-of-use assets are depreciated over the shorter period of either the lease term or the useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset
reflects that the Company expects to exercise the purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset.
The Company has elected to apply the practical expedient that permits a lessee not to separate non-lease
components and instead account for any lease and associated non-lease components as a single
arrangement.
II. Lessor
Power Purchase Agreements ("PPAs") and other long-term contracts may contain, or may be considered,
leases where the fulfillment of the arrangement is dependent on the use of a specific asset (e.g., a generating
unit) and the arrangement conveys to the customer the right to control the use of that asset.
TransAlta Corporation • 2022 Integrated Report
F23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Where the Company determines that the contractual provisions of a contract contain, or are, a lease and
result in the customer assuming the principal risks and rewards of ownership of the asset, the arrangement is
a finance lease. Assets subject to finance leases are not reflected as PP&E and the net investment in the
lease, represented by the present value of the amounts due from the lessee, is recorded in the Consolidated
Statements of Financial Position as a financial asset, classified as a finance lease receivable. The payments
considered to be part of the leasing arrangement are apportioned between a reduction in the lease receivable
and finance lease income. The finance lease income element of the payments is recognized using a method
that results in a constant rate of return on the net investment in each period and is reflected in finance lease
income on the Consolidated Statements of Earnings (Loss).
Where the Company determines that the contractual provisions of a contract contain, or are, a lease and
result in the Company retaining the principal risks and rewards of ownership of the asset, the arrangement is
an operating lease. For operating leases, the asset is, or continues to be, capitalized as PP&E and depreciated
over its useful life.
When the Company has subleased all or a portion of an asset it is leasing and for which it remains the primary
obligor under the lease, it accounts for the head lease and the sublease as two separate contracts. The
sublease is classified as a finance lease by reference to the right-of-use asset arising from the head lease.
M. Non-Controlling Interests
Non-controlling interests arise from business combinations in which the Company acquires less than a 100
per cent interest. Non-controlling interests are initially measured at either fair value or at the non-controlling
interest’s proportionate share of the acquiree’s identifiable net assets. The Company determines on a
transaction-by-transaction basis for which the measurement method is used. Non-controlling interests also
arise from other contractual arrangements between the Company and other parties, whereby the other party
has acquired an equity interest in a subsidiary and the Company retains control.
Subsequent to acquisition, the carrying amount of non-controlling interests is increased or decreased by the
non-controlling interest’s share of subsequent changes in equity and payments to the non-controlling
interest. Total comprehensive income (loss) is attributed to the non-controlling interests even if this results in
the non-controlling interests having a negative balance.
N. Joint Arrangements
A joint arrangement is a contractual arrangement that establishes the terms by which two or more parties
agree to undertake and jointly control an economic activity. The Company's joint arrangements are generally
classified as two types: joint operations and joint ventures.
A joint operation arises when the parties that have joint control have rights to the assets and obligations for
the liabilities relating to the arrangement. Generally, each party takes a share of the output from the asset and
each bears an agreed upon share of the costs incurred in respect of the joint operation. The Company reports
its interests in joint operations in its consolidated financial statements using the proportionate consolidation
method by recognizing its share of the assets, liabilities, revenues and expenses in respect of its interest in
the joint operation.
In a joint venture, the venturers do not have rights to individual assets or obligations of the venture. Rather,
each venturer has rights to the net assets of the arrangement. The Company reports its interests in joint
ventures using the equity method. Under the equity method, the investment is initially recognized at cost and
the carrying amount is increased or decreased to recognize the Company’s share of the joint venture’s net
earnings or loss after the date of acquisition. The impact of transactions between the Company and joint
ventures is eliminated based on the Company’s ownership interest. Distributions received from joint ventures
reduce the carrying amount of the investment. Any excess of the cost of an acquisition less the fair value of
the recognized identifiable assets, liabilities and contingent liabilities of an acquired joint venture is
recognized as goodwill and is included in the carrying amount of the investment and is assessed for
impairment as part of the investment.
Investments in joint ventures are evaluated for impairment at each reporting date by first assessing whether
there is objective evidence that the investment is impaired. If such objective evidence is present, an
impairment charge is recognized if the investment’s recoverable amount is less than its carrying amount. The
investment’s recoverable amount is determined as the higher of value in use and fair value less costs of
disposal.
TransAlta Corporation • 2022 Integrated Report
F24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
O. Business Combinations
Transactions in which the acquisition constitutes a business are accounted for using the acquisition method.
Identifiable assets acquired and liabilities assumed are measured at their acquisition date fair values. A
business consists of inputs and processes applied to those inputs that have the ability to contribute to the
creation of outputs. Goodwill is measured as the excess of the fair value of consideration transferred less the
fair value of the identifiable assets acquired and liabilities assumed. Acquisition-related costs to effect the
business combination, with the exception of costs to issue debt or equity securities, are recognized in net
earnings as incurred.
The optional fair value concentration test is applied on a transaction-by-transaction basis to permit a
simplified assessment of whether an acquired set of activities and assets are not a business. Where
substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or
group of similar identifiable assets, the Company may elect to treat the acquisition as an asset acquisition and
not as a business combination.
P. Significant Accounting Judgments and Key Sources of Estimation Uncertainty
The preparation of financial statements requires management to make judgments, estimates and assumptions
that could affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent
assets and liabilities during the period. These estimates are subject to uncertainty. Actual results could differ
from those estimates due to factors such as fluctuations in interest rates, foreign exchange rates, inflation
and commodity prices and changes in economic conditions, legislation and regulations.
In the process of applying the Company’s accounting policies, management has to make judgments and
estimates about matters that are highly uncertain at the time the estimate is made and that could significantly
affect the amounts recognized in the consolidated financial statements. Different estimates with respect to
key variables used in the calculations, or changes to estimates, could potentially have a material impact on
the Company’s financial position or performance. The key judgments and sources of estimation uncertainty
are described below:
I. Impairment of PP&E and Goodwill
Impairment exists when the carrying amount of an asset, CGU or group of CGUs to which goodwill relates
exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use.
An assessment is made at each reporting date as to whether there is any indication that an impairment
charge may exist or that a previously recognized impairment charge may no longer exist or may have
decreased. In determining fair value less costs of disposal, information about third-party transactions for
similar assets is used and if none is available, other valuation techniques, such as discounted cash flows, are
used. Value in use is computed using the present value of management’s best estimates of future cash flows
based on the current use and present condition of the asset.
In estimating either fair value less costs of disposal or value in use using discounted cash flow methods,
estimates and assumptions must be made about sales prices, cost of sales, production, fuel consumed,
capital expenditures, retirement costs and other related cash inflows and outflows over the life of the
facilities, which can range from three to 50 years. In developing these assumptions, management uses
estimates of contracted and future market prices based on expected market supply and demand in the region
in which the plant operates, anticipated production levels, planned and unplanned outages, changes to
regulations and transmission capacity or constraints for the remaining life of the facilities.
Discount rates are determined by employing a weighted average cost of capital methodology that is based on
capital structure, cost of equity and cost of debt assumptions based on comparable companies with similar
risk characteristics and market data as the asset, CGU or group of CGUs subject to the test. These estimates
and assumptions are susceptible to change from period to period and actual results can and often do, differ
from the estimates and can have either a positive or negative impact on the estimate of the impairment
charge and may be material.
TransAlta Corporation • 2022 Integrated Report
F25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The impairment outcome can also be impacted by the determination of CGUs or groups of CGUs for asset
and goodwill impairment testing. A CGU is the smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from other assets or groups of assets and goodwill is
allocated to each CGU or group of CGUs that is expected to benefit from the synergies of the acquisition from
which the goodwill arose. The allocation of goodwill is reassessed upon changes in the composition of
segments, CGUs or groups of CGUs. In respect of determining CGUs, significant judgment is required to
determine what constitutes independent cash flows between power plants that are connected to the same
system. The Company evaluates the market design, transmission constraints and the contractual profile of
each facility, as well as the Company’s own commodity price risk management plans and practices, in order to
inform this determination.
With regard to the allocation or reallocation of goodwill, significant judgment is required to evaluate synergies
and their impacts. Minimum thresholds also exist with respect to segmentation and internal monitoring
activities. The Company evaluates synergies with regard to opportunities from combined talent and
technology, functional organization and future growth potential and considers its own performance
measurement processes in making this determination. Information regarding significant judgments and
estimates in respect of impairment during 2020 to 2022 is disclosed in Notes 7, 19 and 22.
II. Leases
In determining whether the Company’s contracts contain, or are, leases, management must use judgment in
assessing whether the contract provides the customer with the right to substantially all of the economic
benefits from the use of the asset during the lease term and whether the customer obtains the right to direct
the use of the asset during the lease term. For those agreements considered to contain, or be, leases, further
judgment is required to determine the lease term by assessing whether termination or extension options are
reasonably certain to be exercised. Judgment is also applied in identifying in-substance fixed payments
(included) and variable payments that are based on usage or performance factors (excluded) and in
identifying lease and non-lease components (services that the supplier performs) of contracts and in
allocating contract payments to lease and non-lease components.
For leases where the Company is a lessor, judgment is required to determine if substantially all of the
significant risks and rewards of ownership are transferred to the customer or remain with the Company to
appropriately account for the agreement as either a finance or operating lease. These judgments can be
significant and impact how the Company classifies amounts related to the arrangement as either PP&E or as a
finance lease receivable on the Consolidated Statements of Financial Position and therefore the amount of
certain items of revenue and expense is dependent upon such classifications.
III. Income Taxes
Preparation of the consolidated financial statements involves determining an estimate of, or provision for,
income taxes in each of the jurisdictions in which the Company operates. The process also involves making
an estimate of income taxes currently payable and income taxes expected to be payable or recoverable in
future periods, referred to as deferred income taxes. Deferred income taxes result from the effects of
temporary differences due to items that are treated differently for tax and accounting purposes. The tax
effects of these differences are reflected in the Consolidated Statements of Financial Position as deferred
income tax assets and liabilities. An assessment must also be made to determine the likelihood that the
Company’s future taxable income will be sufficient to permit the recovery of deferred income tax assets. To
the extent that such recovery is not probable, deferred income tax assets must be reduced. Management
uses the Company’s long-range forecasts as a basis for evaluation of recovery of deferred income tax assets.
Management must exercise judgment in its assessment of continually changing tax interpretations,
regulations and legislation to ensure deferred income tax assets and liabilities are complete and fairly
presented. Differing assessments and applications than the Company’s estimates could materially impact the
amounts recognized for deferred income tax assets and liabilities. Information regarding the impacts of the
Company’s tax policies is disclosed in Note 11.
TransAlta Corporation • 2022 Integrated Report
F26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IV. Financial Instruments and Derivatives
The Company’s financial instruments and derivatives are accounted for at fair value, with the initial and
subsequent changes in fair value affecting earnings in the period the change occurs. The fair values of
financial instruments and derivatives are classified within three levels, with Level III fair values determined
using inputs for the asset or liability that are not readily observable. These fair value levels are outlined and
discussed in more detail in Note 14. Some of the Company’s fair values are included in Level III because they
are not traded on an active exchange or have terms that extend beyond the time period for which exchange-
based quotes are available and require the use of internal valuation techniques or models to determine fair
value.
The determination of the fair value of these contracts and derivative instruments can be complex and relies
on judgments and estimates concerning future prices, volatility and liquidity, among other factors. These fair
value estimates may not necessarily be indicative of the amounts that could be realized or settled and
changes in these assumptions could affect the reported fair value of financial instruments. Fair values can
fluctuate significantly and can be favourable or unfavourable depending on current market conditions.
Judgment is also used in determining whether a highly probable forecasted transaction designated in a cash
flow hedge is expected to occur based on the Company’s estimates of pricing and production to allow the
future transaction to be fulfilled.
When the Company enters into contracts to buy or sell non-financial items, such as certain commodities, and
the contracts can be settled net in cash, the Company must use judgment to evaluate whether such contracts
were entered into and continue to be held for the purposes of the receipt or delivery of the commodity in
accordance with the Company's expected purchase, sale or usage requirements (i.e., normal purchase and
sale). If this assertion cannot be supported, initially at contract inception and on an ongoing basis, the
contracts must be accounted for as derivatives and measured at fair value, with changes in fair value
recognized in net earnings. In supporting the normal purchase and sale assertion, the Company considers the
nature of the contracts, the forecasted demand and supply requirements to which the contracts relate and its
past practice of net settling other similar contracts, which may taint the normal purchase and sale assertion.
The Company also enters into PPAs and contracts for differences and judgment is applied to determine if the
contract meets the "own use" exemption or if derivative treatment is required.
V. Project Development Costs
Project development costs are recognized in operating expenses until construction of a facility or acquisition
of an investment is likely to occur, there is reason to believe that future costs are recoverable and that efforts
will result in future value to the Company, at which time the costs incurred subsequently are included in PP&E
or other assets. The appropriateness of capitalization of these costs is evaluated each reporting period and
amounts capitalized for projects no longer probable of occurring or when there is uncertainty of timing of
when the projects will proceed are charged to net earnings. Management is required to use judgment to
determine if there is reason to believe that future costs are recoverable and that efforts will result in future
value to the Company when determining the amount to be capitalized. Information regarding project
development costs is disclosed in Note 23 and information on the write-off of project development costs is
disclosed in Note 7.
VI. Provisions for Decommissioning and Restoration Activities
TransAlta recognizes provisions for decommissioning and restoration obligations as outlined in Note 2(K).
Initial decommissioning provisions and subsequent changes thereto, are determined using the Company’s
best estimate of the required cash expenditures, adjusted to reflect the risks and uncertainties inherent in the
timing and amount of settlement. The estimated cash expenditures are present valued using a current, risk-
adjusted, market-based, pre-tax discount rate. A change in estimated cash flows, market interest rates or
timing could have a material impact on the carrying amount of the provision. Information regarding significant
judgments and estimates made during 2020 to 2022 in respect of decommissioning and restoration
provisions is disclosed in Notes 7, 19 and 24.
VII. Useful Life of PP&E
Each significant component of an item of PP&E is depreciated over its estimated useful life. Estimated useful
lives are determined based on current facts and past experience and take into consideration the anticipated
physical life of the asset, existing long-term sales agreements and contracts, current and forecasted demand,
the potential for technological obsolescence and regulations. The useful lives of PP&E are reviewed at least
annually to ensure they continue to be appropriate. Information on changes in useful lives of facilities is
disclosed in Note 19.
TransAlta Corporation • 2022 Integrated Report
F27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
VIII. Employee Future Benefits
The Company provides pension and other post-employment benefits, such as health and dental benefits, to
employees. The cost of providing these benefits is dependent upon many factors, including actual plan
experience and estimates and assumptions about future experience.
The liability for pension and post-employment benefits and associated costs included in annual compensation
expenses are impacted by estimates related to:
•
•
Employee demographics, including age, compensation levels, employment periods, the level of
contributions made to the plans and earnings on plan assets;
The effects of changes to the provisions of the plans; and
• Changes in key actuarial assumptions, including rates of compensation and health-care cost
increases and discount rates.
Due to the complexity of the valuation of pension and post-employment benefits, a change in the estimate of
any one of these factors could have a material effect on the carrying amount of the liability for pension and
other post-employment benefits or the related expense. These assumptions are reviewed annually to ensure
they continue to be appropriate. Disclosures on employee future benefits are disclosed in Note 32.
IX. Other Provisions
Where necessary, the Company recognizes provisions arising from ongoing business activities, such as
interpretation and application of contract terms, ongoing litigation and force majeure claims. These provisions
and subsequent changes thereto, are determined using the Company’s best estimate of the outcome of the
underlying event and can also be impacted by determinations made by third parties, in compliance with
contractual requirements. The actual amount of the provisions that may be required could differ materially
from the amount recognized. More information is disclosed in Notes 8 and 24 with respect to other
provisions.
X. Revenue from Contracts with Customers
Where contracts contain multiple promises for goods or services, management exercises judgment in
determining whether goods or services constitute distinct goods or services or a series of distinct goods that
are substantially the same and that have the same pattern of transfer to the customer. The determination of a
performance obligation affects whether the transaction price is recognized at a point in time or over time.
Management considers both the mechanics of the contract and the economic and operating environment of
the contract in determining whether the goods or services in a contract are distinct.
In determining the transaction price and estimates of variable consideration, management considers the past
history of customer usage in estimating the goods and services to be provided to the customer. The
Company also considers the historical production levels and operating conditions for its variable generating
assets. The Company’s contracts generally outline a specific amount to be invoiced to a customer associated
with each performance obligation in the contract. Where contracts do not specify amounts for individual
performance obligations, the Company estimates the amount of the transaction price to allocate to individual
performance obligations based on their stand-alone selling price, which is primarily estimated based on the
amounts that would be charged to customers under similar market conditions.
The satisfaction of performance obligations requires management to make judgments as to when control of
the underlying good or service transfers to the customer. Determining when a performance obligation is
satisfied affects the timing of revenue recognition. Management considers both customer acceptance of the
good or service and the impact of laws and regulations such as certification requirements, in determining
when this transfer occurs.
When contracts are modified, management must exercise judgment to determine, depending upon the facts
and circumstances of the changes to the contract, whether the modification is accounted for as a new
contract or as part of the existing contract. If it is required to be accounted for as part of the existing contract
the transaction price can be affected and adjustments to previously recognized revenue can occur, or the
impacts can be reflected prospectively from the modification date.
Management also applies judgment in determining whether the invoice practical expedient permits
recognition of revenue at the invoiced amount if that invoiced amount corresponds directly with the entity's
performance to date.
TransAlta Corporation • 2022 Integrated Report
F28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
XI. Classification of Joint Arrangements
Upon entering into a joint arrangement, the Company must classify it as either a joint operation or joint
venture, and this classification affects the accounting for the joint arrangement. In making this classification,
the Company exercises judgment in evaluating the terms and conditions of the arrangement to determine
whether the parties have rights to the assets and obligations or rights to the net assets. Factors such as the
legal structure, contractual arrangements and other facts and circumstances, such as where the purpose of
the arrangement is primarily for the provision of the output to the parties and when the parties are
substantially the only source of cash flows for the arrangement, must be evaluated to understand the rights
of the parties to the arrangement.
XII. Significant Influence
Upon entering into an investment, the Company must classify it as either an investment in an associate or an
investment under IFRS 9. In making this classification, the Company exercises judgment in evaluating whether
the Company has significant influence over the investee. Significant influence is the power to participate in
the financial and operating policy decisions of the investee, but is not control or joint control over those
policies. If the Company holds 20 per cent or more of the voting rights in the investee, it is presumed that the
entity has significant influence, unless it can be clearly demonstrated that this is not the case. Other factors
such as representation on the Board, participation in policy-making processes, material transactions between
the Company and investee, interchange of managerial personnel or providing essential technical information
are considered when assessing if the Company has significant influence over an investee.
XIII. Change in Estimates
During the year ended Dec. 31, 2022, there were changes in estimates relating to asset useful lives and
depreciation (Note 19), decommissioning and other provisions (Note 24) and defined benefit obligation (Note
27). During the year ended Dec. 31, 2021, there were changes in estimates relating to decommissioning and
other provisions (Note 24) and defined benefit obligation (Note 27).
3. Accounting Changes
A. Current Accounting Changes
International Accounting Standards ("IAS") 37 Provisions, Contingent
Amendments to
Liabilities and Contingent Assets
On May 14, 2020, the IASB issued Onerous Contracts – Cost of Fulfilling a Contract and amendments to IAS
37 Provisions, Contingent Liabilities and Contingent Assets to specify which costs to include when assessing
whether a contract will be loss-making. The amendments are effective for annual periods beginning on or
after Jan. 1, 2022, and the Company adopted these amendments as of Jan. 1, 2022. The amendments are
effective for contracts for which an entity has not yet fulfilled all its obligations on or after the effective date.
No adjustments resulted on adoption of the amendments on Jan. 1, 2022.
B. Future Accounting Changes
The Company closely monitors both new accounting standards and amendments to existing accounting
standards issued by the IASB. The following standard has been issued but is not yet in effect.
Amendments to IAS 12 Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction
On May 7, 2021, the IASB issued amendments to IAS 12 Deferred Tax Related to Assets and Liabilities Arising
from a Single Transaction. The amendments clarify that the initial recognition exemption under IAS 12 does
not apply to transactions such as leases and decommissioning obligations. These transactions give rise to
equal and offsetting temporary differences in which deferred tax should be recognized.
The amendments are effective for annual periods beginning on or after Jan. 1, 2023, with early application
permitted. The Company's current position aligns with the amendment and no financial impact is therefore
expected upon adoption on the effective date.
TransAlta Corporation • 2022 Integrated Report
F29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amendments to IAS 1 Classification of Liabilities as Current or Non‐Current
In October 2022, the IASB issued amendments to clarify how conditions with which an entity must comply
within 12 months after the reporting period affect the classification of a liability, in addition to the amendment
from January 2020 where
IAS 1 Presentation of Financial
Statements, to provide a more general approach to the presentation of liabilities as current or non‐current
in place at the reporting date. These amendments specify
based on contractual arrangements
that the rights and conditions existing at the end of the reporting period are relevant in determining whether
the Company has a right to defer settlement of a liability by at least 12 months, provided that management's
expectations are not a relevant consideration as to whether the Company will exercise its rights to defer
settlement of a liability and clarify when a liability is considered settled.
issued amendments
IASB
the
to
The amendments are effective for annual periods beginning on or after Jan. 1, 2024, and are to be applied
retrospectively. The Company has not yet determined the impact of these amendments on its consolidated
financial statements.
Amendments to IFRS 16 Lease Liability in a Sale-and-Leaseback
In September 2022, the IASB issued Lease Liability in a Sale and Leaseback, which amends IFRS 16 Leases to
provide additional specifications when subsequently measuring the lease liability that require the seller-lessee
to determine lease payments and revised lease payments in a way that does not result in the seller-lessee
recognizing any amount of the gain or loss that relates to the right of use it retains. The current effective date
is Jan. 1, 2024. The Company is currently reviewing the impacts of this amendment on its consolidated
financial statements.
C. Comparative Figures
Certain comparative figures have been reclassified to conform to the current period’s presentation. These
reclassifications did not impact previously reported net earnings.
TransAlta Corporation • 2022 Integrated Report
F30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Business Acquisitions
Acquisition of North Carolina Solar
On Nov. 5, 2021, the Company closed the acquisition of a 100 per cent membership interest in CI-II Mitchell
Holding LLC, owner of a 122 MW portfolio of operating solar sites located in North Carolina (collectively,
“North Carolina Solar”), for cash consideration of US$99 million (including working capital adjustments) and
the assumption of existing tax equity obligations.
In accordance with IFRS 3 Business Combinations, the substance of the transactions described below
constituted a business combination for TransAlta. The fair values of the identifiable assets and liabilities of
the acquired entity in the business combinations as at the date of acquisition were:
North Carolina Solar
Nov. 5, 2021
Assets
Cash and cash equivalents
Accounts receivable
Property, plant and equipment
Right-of-use assets
Liabilities
Accounts payable and accrued liabilities
Lease liabilities
Tax equity liability
Deferred taxes
Decommissioning provisions
Net assets acquired
Cash consideration
Working capital consideration
Total purchase consideration transferred
4
4
146
13
(4)
(13)
(20)
(3)
(4)
123
120
3
123
In 2021, TransAlta Renewables Inc. ("TransAlta Renewables"), a subsidiary of the Company, acquired a 100
per cent economic interest in the North Carolina Solar facility from a wholly owned subsidiary of the Company
through a tracking preferred share structure for aggregate consideration of approximately US$102 million.
TransAlta Corporation • 2022 Integrated Report
F31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Revenue
A. Disaggregation of Revenue
The majority of the Company's revenues are derived from the sale of power, capacity and environmental
leasing of power facilities and from asset optimization activities, which the Company
attributes,
disaggregates into the following groups for the purpose of determining how economic factors affect the
recognition of revenue.
Year ended Dec. 31, 2022
Revenues from contracts with customers
Power and other
Environmental attributes(1)
Revenue from contracts with customers
Hydro
Wind and
Solar
Energy
Transition
Gas
Energy
Marketing Corporate
Total
33
1
34
220
462
50
—
270
462
10
—
10
—
—
—
—
—
—
—
—
—
725
51
776
32
Revenue from leases(2)
—
—
32
Revenue from derivatives and other trading
activities(3)
—
(87)
(821)
243
160
(2)
(507)
Revenue from merchant sales
564
86
1,529
Other
Total revenue
8
20
7
606
289
1,209
Revenues from contracts with customers
Timing of revenue recognition
At a point in time
Over time
Total revenue from contracts with customers
1
33
34
50
—
220
462
270
462
461
—
714
12
(2)
10
—
—
160
—
—
—
(1) The environmental attributes represent environmental attribute sales not bundled with power and other sales.
(2) Total lease income from long-term contracts that meet the criteria of operating leases.
(3) Represents realized and unrealized gains or losses from hedging and derivative positions.
—
2,640
—
35
(2) 2,976
—
—
—
63
713
776
Year ended Dec. 31, 2021
Revenues from contracts with customers
Hydro
Wind and
Solar
Energy
Transition
Gas
Energy
Marketing Corporate
Total
Power and other
Environmental attributes(1)
28
207 395
—
28 —
Revenue from contracts with customers
28
235 395
Revenue from leases(2)
—
—
19
24
—
24
—
—
—
—
—
—
—
—
—
654
28
682
19
Revenue from derivatives and other trading
activities(3)
—
(14)
(118)
138
211
4
221
Revenue from merchant sales
345
68 808
546
10
16
5
1
—
—
—
1,767
—
32
Other
Total revenue
Revenues from contracts with customers
Timing of revenue recognition
At a point in time
Over time
Total revenue from contracts with customers
383
305 1,109
709
211
4
2,721
—
28
2
28
28
207 393
235 395
23
1
24
—
—
—
—
—
—
53
629
682
(1) The environmental attributes represent environmental attribute sales not bundled with power and other sales.
(2) Total lease income from long-term contracts that meet the criteria of operating leases.
(3) Represents realized and unrealized gains or losses from hedging and derivative positions. Wind and Solar has been revised to present
revenue classifications consistent with current period.
TransAlta Corporation • 2022 Integrated Report
F32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended Dec. 31, 2020
Revenues from contracts with customers
Hydro
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing Corporate
Total
Power and other
Environmental attributes(1)
141
238 465
—
23 —
Revenue from contracts with customers
141
261 465
Revenue from leases(2)
Revenue from derivatives and
other trading activities(3)
Revenue from merchant sales
Other(4)
Total revenue
Revenues from contracts with customers
Timing of revenue recognition
At a point in time
Over time
Total revenue from contracts with customers
—
—
123
—
8
(8)
3
8
49 200
11
7
156
—
156
—
283
264
1
—
—
—
—
122
—
—
— 1,000
—
23
— 1,023
—
123
12
—
(5)
417
516
22
152
329 787
704
122
7 2,101
—
25
7
141
141
236 458
261 465
26
130
156
—
—
—
—
58
—
965
— 1,023
(1) The environmental attributes represent environmental attribute sales not bundled with power and other sales.
(2) Total lease income from certain PPAs and long-term contracts that meet the criteria of operating leases.
(3) Represents realized and unrealized gains or losses from hedging and derivative positions. Wind and Solar has been revised to present
revenue classifications consistent with current period.
(4) Includes government incentives and other miscellaneous.
B. Performance Obligations
The performance obligations in the Company's contracts with its customers include the provision of electricity
and steam capacity; the delivery of electricity, thermal energy, environmental attributes; the provision of
operation and maintenance services and water management services; and the supply of byproducts from coal
generation.
The aggregate amount of transaction prices allocated to remaining performance obligations (contract
revenues that have not yet been recognized) as at Dec. 31, 2022, is approximately $2,790 million, with
approximately $465 million expected to be recognized during the period 2023-2025; $490 million for the
period of 2026-2028; $750 million for the period of 2029-2033; and $1,085 million for 2034 and thereafter.
These amounts exclude revenues related to contracts that qualify for the invoice practical expedient and
future revenues that are related to constrained variable consideration. In many of the Company’s contracts,
elements of the transaction price are considered constrained, such as for variable revenues dependent upon
future production volumes that are driven by customer or market demand or market prices that are subject to
factors outside the Company’s influence. As a result, the amounts of future revenues disclosed above
represent only a portion of future revenues that are expected to be realized by the Company from its
contractual portfolio.
TransAlta Corporation • 2022 Integrated Report
F33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Expenses by Nature
Fuel, Purchased Power and Operations, Maintenance and Administration ("OM&A")
Fuel and purchased power and OM&A expenses classified by nature are as follows:
Year ended Dec. 31
2022
2021
2020
Fuel and
purchased
power
Fuel and
purchased
power
OM&A
Fuel and
purchased
power
OM&A
Gas fuel costs
Coal fuel costs(1)
Royalty, land lease, other direct costs
Purchased power
Mine depreciation(2)
Salaries and benefits
Other operating expenses(3)
Total
578
141
25
514
—
5
—
1,263
—
—
—
—
—
263
258
521
306
164
19
339
190
36
—
1,054
—
—
—
—
—
234
277
511
159
269
20
163
144
50
—
805
OM&A
—
—
—
—
—
235
237
472
(1) Included in coal fuel costs for 2021 and 2020 was $17 million and $15 million, respectively, related to the impairment of coal inventory.
(2) Included in mine depreciation for 2021 and 2020 was $48 million and $22 million, respectively, related to mine depreciation that was
initially recorded in the standard cost of coal inventory and then subsequently written down during 2021.
(3) Included in OM&A costs for 2021 was $28 million related to the write-down of parts and material inventory related to the Highvale mine
and coal operations at our natural gas converted facilities.
7. Asset Impairment Charges
As part of the Company’s monitoring controls, long-range forecasts are prepared for each CGU. The long-
range forecast estimates are used to assess the significance of potential indicators of impairment and provide
criteria to evaluate adverse changes in operations. The Company also considers the relationship between its
market capitalization and its book value, among other factors, when reviewing for indicators of impairment.
When indicators of impairment are present, the Company estimates a recoverable amount (the higher of value
in use or fair value less costs of disposal) for the affected CGUs using discounted cash flow projections. The
valuations are subject to measurement uncertainty from assumptions and inputs to the discount rates, power
price forecasts, useful lives of the assets (extending to the last planned asset retirement in 2072) and long-
range forecasts, which includes changes to production, fuel costs, operating costs and capital expenditures.
The Company recognized the following asset impairment charges (reversals):
For year ended Dec. 31
2022
2021
2020
Segments:
Hydro
Wind and Solar
Gas
Energy Transition
Corporate
Changes in decommissioning and restoration provisions on
retired assets(1)
Intangible asset impairment charges - coal rights(2)
Project development costs(3)
Asset impairment charges
21
43
—
—
(2)
(53)
—
—
9
5
12
5
540
27
32
17
10
648
2
—
—
82
—
—
—
—
84
(1) Changes relate to changes in discount rates and cash flow revisions on retired assets in 2022 and cash flow revisions on retired assets in
2021. Refer to Note 24 for further details.
(2) Impaired to nil in 2021, as no future coal will be extracted from this area of the mine.
(3) During 2021, the Company recorded an impairment charge of $9 million in the Hydro segment for the balance of project development
costs at one of our hydro facilities as there is uncertainty on timing of when the project will proceed and $1 million related to projects that
are no longer proceeding.
TransAlta Corporation • 2022 Integrated Report
F34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A. Hydro
During 2022, the Company recorded net impairment charges of $21 million on four hydro facilities as a result
of changes in key assumptions, that included significant increases in discount rates, changes in pricing and
changes in estimated future cash flows. The recoverable amounts of $89 million in total for these four assets
were estimated based on fair value less costs of disposal utilizing a discounted cash flow approach and are
categorized as a Level III fair value measurement. The carrying value of property, plant & equipment, right-of-
use assets and intangible assets for these Hydro facilities was $88 million as at Dec. 31, 2022.
B. Wind and Solar
During 2022, the Company recorded net impairment charges of $43 million on five wind facilities and one
solar facility as a result of changes in key assumptions, that included significant increases in discount rates,
changes in pricing and changes in estimated future cash flows. The recoverable amounts of $754 million for
these six assets were estimated based on fair value less costs of disposal utilizing a discounted cash flow
approach and are categorized as a Level III fair value measurement. The carrying value of property, plant &
equipment, right-of-use assets and intangible assets for these Wind and Solar facilities was $748 million as at
Dec. 31, 2022.
During 2021, the Company recorded impairment charges of $10 million for a wind asset as a result of an
increase in estimated decommissioning costs after the review of an engineering study commissioned for the
wind sites. The resulting fair value measurement less costs of disposal is categorized as a Level III fair value
measurement and the Company adjusted the expected value down to $65 million using discount rates of 5.0
per cent.
Additionally, during 2021, the Company recognized impairment charges of $2 million related to the Kent Hills
Wind LP tower failure. The Company's subsidiary, Kent Hills Wind LP, experienced a single tower failure at its
167 MW Kent Hills wind facility in Kent Hills, New Brunswick. The failure involved a collapsed tower located
within the Kent Hills 2 site.
The calculation of fair value less costs of disposal for all of the above facilities is most sensitive to the
following assumptions:
Wind and Solar
Hydro
Location of assets
Current year contract and
merchant discount rates (1)
Prior year contract and
merchant discount rates(1)
Canada
US
6.4 and 7.1 per cent
5.0 and 5.0 per cent
6.5 and 7.7 per cent
5.1 and 5.0 per cent
Canada
5.9 and 6.4 per cent
3.6 and 4.9 per cent
(1) Discount rates were related to the valuations performed for the Wind and Solar and Hydro segments in 2022. The prior year discount
rates were related to the previous detailed valuation performed for the Wind and Solar segment in 2021 and for the Hydro segment in
2019.
C. Energy Transition
During 2021, the Company recognized asset impairment charges in the Energy Transition segment as a result
of the decision to suspend the Sundance Unit 5 repowering project ($191 million) and planned retirements of
Keephills Unit 1, effective Dec. 31, 2021 ($94 million), and Sundance Unit 4, effective April 1, 2022
($56 million). Keephills Unit 1 and Sundance Unit 4 impairment assessments were based on the estimated
salvage values of these units, which were in excess of the expected economic benefits from these units. For
the Sundance Unit 5 repowering project, the recoverable amount was determined based on estimated fair
value less costs of disposal of selling the assets under construction and estimated salvage value for the
balance of the costs. The fair value measurement for assets under construction is categorized as a Level III
fair value measurement. The total remaining estimated recoverable amount and salvage values for Sundance
Unit 5 repowering project was $33 million. Discounting did not have a material impact to these asset
impairments. The asset retirement and project suspension decisions were based on the Company's
assessment of future market conditions, the age and condition of in-service units, as well as TransAlta's
strategic focus toward renewable energy solutions.
TransAlta Corporation • 2022 Integrated Report
F35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During 2021, with the expected closure of the Highvale mine at the end of 2021, it was determined that the
estimated salvage value exceeded the economic benefit to the Alberta Merchant CGU. The asset has been
removed from the Alberta Merchant CGU for impairment purposes and was assessed for impairment as an
individual asset, which resulted in the recognized impairment charge of $195 million in the Energy Transition
segment, with the asset being written down to salvage value.
During 2020, the Company recognized impairment charges on Sundance Unit 3 in the amount of $70 million
due to the Company's decision to retire the unit. As there were no estimated future cash flows from power
generation expected to be derived from the unit, the unit was removed from the Alberta Merchant CGU and
immediately written down to the salvage value of the scrap materials. In addition, the Company recognized an
impairment of $9 million (US$7 million) due to a decrease in the fair value of land for the Centralia mine
determined through a third-party appraiser.
D. Corporate
Energy Transfer Canada, formerly SemCAMS Midstream ULC, purported to terminate the agreements related
to the development and construction of the Kaybob Cogeneration Project. As a result, during the first quarter
of 2021, the Company recorded impairment charges of $27 million in the Corporate segment as this facility
was not yet operational. The recoverable amount was based on estimated fair value less costs of disposal of
reselling the equipment purchased to date. During the fourth quarter of 2022, the dispute has been settled.
The Company reversed $2 million of the impairment loss previously recognized.
8. Net Other Operating (Income) Loss
Net other operating (income) loss includes the following:
Year ended Dec. 31
Alberta Off-Coal Agreement
Liquidated damages recoverable
Insurance recoveries
Supplier and other contract settlements
Onerous contract provisions
Retail power contract amortization (Note 27)
Net other operating (income) loss
A. Alberta Off-Coal Agreement ("OCA")
2022
2021
2020
(40)
(12)
(7)
5
—
(4)
(58)
(40)
(40)
—
—
34
14
—
8
—
—
—
29
—
(11)
The Company receives payments from the Government of Alberta for the cessation of coal-fired emissions on
or before Dec. 31, 2030. Under the terms of the agreement, the Company receives annual cash payments on
or before July 31 of approximately $40 million ($37 million, net of the non-controlling interest related to
Sheerness), which commenced Jan. 1, 2017, and will terminate at the end of 2030. The Company recognizes
the off-coal payments evenly throughout the year. Receipt of the payments is subject to certain terms and
conditions. The OCA’s main condition is the cessation of all coal-fired emissions on or before Dec. 31, 2030,
which has been achieved effective Dec. 31, 2021. The affected plants are not, however, precluded from
generating electricity at any time by any method, other than generation resulting in coal-fired emissions after
Dec. 31, 2030.
B. Liquidated Damages Recoverable
During 2022, the Company recorded $12 million, related to requirements to be met by the contractor on
turbine availability at the Windrise wind facility.
C. Insurance Recoveries
During 2022, the Company received insurance proceeds of $7 million related to the replacement costs for the
single tower failure at the Kent Hills wind facilities.
TransAlta Corporation • 2022 Integrated Report
F36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
D. Supplier and Other Contract Settlements
During 2022, $5 million was expensed related to contract settlements in the year.
During 2021, $34 million was expensed related to decisions to no longer proceed with the Sundance Unit 5
repowering project and to retire Keephills Unit 1, including a deferred asset of $10 million (US$8 million) for
which the Company is unlikely to incur sufficient capital or operating expenditures to utilize the remaining
credit.
E. Onerous Contract Provisions
During 2021, an onerous contract provision for future royalty payments of $14 million was recognized with the
shutdown of the Highvale mine.
During 2020, an onerous contract provision of $29 million was recognized as a result of a decision to
eliminate coal as a fuel source by the end of 2021 at the Sheerness facility. The last coal shipment was
received during the first quarter of 2021, while the payments under the coal supply agreement will continue
until 2025.
9. Investments
The change in investments is as follows:
Classification
Balance, Dec. 31, 2020
Equity income (loss)
Distributions received
Balance, Dec. 31, 2021
Investment
Equity income (loss)
Distributions received
Changes in foreign exchange rates
Net change in fair value recognized in
OCI
Balance, Dec. 31, 2022
Equity-accounted Investments
Skookumchuck
EMG
EIP
Ekona
Total
Equity-
accounted
Equity-
accounted
FVTPL
FVTOCI
85
12
(4)
93
—
10
(5)
7
—
105
15
(3)
—
12
—
(1)
—
1
—
12
—
—
—
—
10
—
—
1
—
11
—
—
—
—
2
—
—
—
(1)
1
100
9
(4)
105
12
9
(5)
9
(1)
129
The Company’s investments in joint ventures and associates that are accounted for using the equity method
consist of its investments in Skookumchuck and EMG.
Skookumchuck Wind Project
TransAlta holds a 49 per cent membership interest in SP Skookumchuck Investment, LLC. Skookumchuck is a
136.8 MW wind project located in Lewis and Thurston counties near Centralia in Washington state. The
project has a 20-year PPA with Puget Sound Energy.
EMG International, LLC
TransAlta holds a 30 per cent membership interest in EMG. During 2022, the contingent purchase price
consideration of US$3.5 million was paid, which was calculated based on actual earnings metrics achieved in
2021 and did not differ from the estimated amount included in the initial purchase price.
TransAlta Corporation • 2022 Integrated Report
F37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summarized financial information on the results of operations relating to the Company’s pro-rata interests in
Skookumchuck and EMG, is as follows:
Year ended Dec. 31
Results of operations
Revenues and other operating income
Expenses
Proportionate share of net earnings
Other Investments
Energy Impact Partners
2022
2021
2020
24
(15)
9
19
(10)
9
3
(2)
1
On May 6, 2022, the Company entered into a commitment to invest US$25 million over the next four years in
Energy Impact Partners ("EIP") Deep Decarbonization Frontier Fund 1 (the “Frontier Fund”). The investment in
the Frontier Fund provides the Company with a portfolio approach to investing in emerging technologies and
the opportunity to identify, pilot, commercialize and bring to market emerging technologies that will facilitate
the transition to net-zero emissions. During 2022, the Company invested $10 million (US$8 million). The
investment is accounted for at FVTPL.
Ekona Power Inc.
On Feb. 1, 2022, the Company made an equity investment of $2 million in Ekona's Class B Preferred Shares.
The investment will help support the commercialization of Ekona’s novel methane pyrolysis technology
platform, which produces cleaner and lower-cost turquoise hydrogen. The Company has irrevocably elected
to measure its investment in Ekona at FVTOCI.
10. Net Interest Expense
The components of net interest expense are as follows:
Year ended Dec. 31
Interest on debt
Interest on exchangeable debentures (Note 26)
Interest on exchangeable preferred shares (Note 26)
Interest income
Capitalized interest (Note 19)
Interest on lease liabilities
Credit facility fees, bank charges and other interest
Tax shield on tax equity financing (Note 25)(1)
Accretion of provisions (Note 24)
Net interest expense
2022
164
29
28
(24)
(16)
7
27
(2)
49
262
2021
2020
163
29
28
(11)
(14)
7
20
(9)
32
158
29
5
(10)
(8)
8
25
1
30
245
238
(1) The credit balance in 2021 primarily relates to the tax benefit associated with investment tax credits claimed in 2021 on the North
Carolina Solar facility that was assigned to the tax equity investor. The tax equity investments are treated as debt under IFRS and the
monetization of the tax attributes is considered a non-cash reduction of the debt balance and is reflected as a reduction in interest
expense.
TransAlta Corporation • 2022 Integrated Report
F38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. Income Taxes
A. Consolidated Statements of Earnings
I. Rate Reconciliation
Year ended Dec. 31
Earnings (loss) before income taxes
Net (earnings) loss attributable to non-controlling interests not subject to tax
Adjusted earnings (loss) before income taxes
Statutory Canadian federal and provincial income tax rate (%)
Expected income tax expense (recovery)
Increase (decrease) in income taxes resulting from:
Differences in effective foreign tax rates
Non-deductible expense(1)
Taxable capital gain
Deferred income tax expense (recovery) related to temporary difference on
investment in subsidiaries
Write-down (reversal of write-down) of unrecognized deferred income tax
assets
Statutory and other rate differences
Adjustments in respect of deferred income tax of previous years(2)
Other(2)
Income tax expense (recovery)
Effective tax rate (%)
2022
353
(94)
259
2021
(380)
(33)
(413)
23.4%
23.6%
61
(98)
(1)
130
18
(2)
(24)
(3)
6
7
192
74%
4
—
—
—
134
4
(4)
5
45
(11%)
2020
(303)
2
(301)
24.5%
(74)
3
—
—
9
8
(7)
(3)
14
(50)
17%
(1) This amount is related to current and prior period tax adjustments in the US to mitigate cash tax relating to the Base Erosion and Anti-
Abuse Tax ("BEAT").
(2) During 2022, the 2021 and 2020 amounts were reclassified from Other to Adjustments in respect of deferred income tax of previous
years to better represent the nature of items impacting income tax expense (recovery). These reclassifications did not impact prior years'
total income tax expense (recovery) or net earnings (loss).
II. Components of Income Tax Expense
The components of income tax expense are as follows:
Year ended Dec. 31
Current income tax expense
2022
65
2021
56
2020
35
Deferred income tax expense (recovery) related to the origination and reversal of
temporary differences
153
(145)
(95)
Deferred income tax expense (recovery) related to temporary difference on
investment in subsidiary
Deferred income tax recovery resulting from changes in tax rates or laws
Deferred income tax expense (recovery) arising from the unrecognized deferred
income tax assets(1)
Income tax expense (recovery)
Year ended Dec. 31
Current income tax expense
Deferred income tax expense (recovery)
Income tax expense (recovery)
(2)
—
(24)
192
—
—
134
45
9
(7)
8
(50)
2022
2021
2020
65
127
192
56
(11)
45
35
(85)
(50)
(1) During the year ended Dec. 31, 2022, the Company recognized deferred tax assets of $24 million (2021 – $134 million write-down, 2020
– $8 million write-down). The deferred income tax assets mainly relate to the tax benefits associated with tax losses related to the
Company's directly owned US operations and other deductible differences. The Company has not recognized $361 million of deferred tax
assets on the basis that it is not probable that sufficient future taxable income would be available to utilize these tax assets. The
Company undertakes an analysis of the recoverability of its tax assets on an annual basis.
TransAlta Corporation • 2022 Integrated Report
F39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B. Consolidated Statements of Changes in Equity
The aggregate current and deferred income tax related to items charged or credited to equity are as follows:
Year ended Dec. 31
Income tax expense (recovery) related to:
Net impact related to cash flow hedges
Net impact related to hedges of foreign operations
Net impact to net actuarial gains (losses)
Income tax recovery reported in equity
2022
2021
2020
(112)
(57)
(23)
(3)
12
—
11
—
(3)
(103)
(46)
(26)
C. Consolidated Statements of Financial Position
Significant components of the Company’s deferred income tax assets (liabilities) are as follows:
As at Dec. 31
Non-capital losses(1)
Future decommissioning and restoration costs
Property, plant and equipment
Risk management assets and liabilities, net
Employee future benefits and compensation plans
Interest deductible in future periods
Foreign exchange differences on US-denominated debt
Other deductible temporary differences
Net deferred income tax asset, before write-down of deferred income tax assets
Unrecognized deferred income tax assets
Net deferred income tax liability, after write-down of deferred income tax assets
2022
244
119
(553)
193
48
—
13
(5)
59
(361)
(302)
2021
530
183
(651)
(53)
53
17
16
(5)
90
(380)
(290)
(1) Non-capital losses expire between 2033 and 2042. Net operating losses from US operations have no expiration.
The net deferred income tax liability is presented in the Consolidated Statements of Financial Position as
follows:
As at Dec. 31
Deferred income tax assets(1)
Deferred income tax liabilities
Net deferred income tax liability
2022
50
(352)
(302)
2021
64
(354)
(290)
(1) The deferred income tax assets presented on the Consolidated Statements of Financial Position are recoverable based on estimated
future earnings and tax planning strategies. The assumptions used in the estimate of future earnings are based on the Company’s long-
range forecasts.
D. Contingencies
As of Dec. 31, 2022, the Company had recognized a net liability of nil (2021 – nil) related to uncertain tax
positions.
In 2022, the Canada Revenue Agency completed its examination of the Company's tax filings for the 2015
taxation year, including its review of an internal reorganization completed in 2015. Upon conclusion of the
2015 audit, no reassessment was issued.
TransAlta Corporation • 2022 Integrated Report
F40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. Non-Controlling Interests
The Company’s subsidiaries and operations that have non-controlling interests are as follows:
Subsidiary/Operation
TransAlta Cogeneration LP
TransAlta Renewables
Kent Hills Wind LP(1)
(1) Owned by TransAlta Renewables.
Non-controlling interest as at Dec. 31, 2022
49.99% — Canadian Power Holdings Inc.
39.9% — Public shareholders
17% — Natural Forces Technologies Inc.
TransAlta Cogeneration, LP (“TA Cogen”) operates a portfolio of cogeneration facilities in Canada and owns
50 per cent of a dual-fuel generating facility.
TransAlta Renewables ("RNW") owns and operates a portfolio of gas and renewable power generation
facilities in Canada and owns economic interests in various other gas and renewable facilities of the
Company. Kent Hills Wind LP, a subsidiary of TransAlta Renewables, owns and operates the 167 MW Kent
Hills (1, 2 and 3) wind facilities located in New Brunswick.
Summarized financial information relating to subsidiaries with significant non-controlling interests is as
follows:
A. TransAlta Renewables
The net earnings, distributions and equity attributable to non-controlling interests include the 17 per cent
non-controlling interest in Kent Hills Wind LP.
Year ended Dec. 31
Revenues
Net earnings
Total comprehensive income (loss)
Amounts attributable to the non-controlling interests:
Net earnings
Total comprehensive income (loss)
Distributions paid to non-controlling interests
As at Dec. 31
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Total equity
Equity attributable to non-controlling interests
Non-controlling interests’ share (per cent)
2022
560
74
(67)
20
(36)
100
2021
2020
470
139
66
50
21
100
2022
240
436
97
223
40
90
80
2021
430
2,989
3,319
(306)
(593)
(1,118)
(1,033)
(1,805)
(2,123)
(732)
(869)
39.9
39.9
TransAlta Corporation • 2022 Integrated Report
F41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B. TA Cogen
Year ended Dec. 31
Revenues
Net earnings (loss)
Total comprehensive income (loss)
Amounts attributable to the non-controlling interest:
Net earnings (loss)
Total comprehensive income (loss)
Distributions paid to Canadian Power Holdings Inc.
As at Dec. 31
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Total equity
Equity attributable to Canadian Power Holdings Inc.
Non-controlling interest share (per cent)
13. Trade and Other Receivables and Accounts Payable
As at Dec. 31
Trade accounts receivable
Collateral provided (Note 15)
Current portion of finance lease receivables (Note 17)
Loan receivable (Note 23)
Income taxes receivable
Trade and other receivables
As at Dec. 31
Accounts payable and accrued liabilities
Interest payable
Collateral held (Note 15)
Accounts payable and accrued liabilities
2022
347
143
143
91
91
87
2021
265
103
103
62
62
56
2022
127
253
(62)
(27)
(291)
(147)
2020
146
(13)
(13)
(6)
(6)
17
2021
66
312
(52)
(36)
(290)
(142)
49.99
49.99
2022
1,165
304
52
4
64
1,589
2022
1,069
17
260
1,346
2021
499
55
40
55
2
651
2021
654
17
18
689
TransAlta Corporation • 2022 Integrated Report
F42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. Financial Instruments
A. Financial Assets and Liabilities — Classification and Measurement
Financial assets and financial liabilities are measured on an ongoing basis at cost, fair value or amortized cost.
The following table outlines the carrying amounts and classifications of the financial assets and liabilities:
Derivatives
used for
hedging
Derivatives
held for
trading
(FVTPL)
Amortized
cost
Other
financial
assets
(FVTPL)
Other
financial
assets
(FVTOCI)
Carrying value as at Dec. 31, 2022
Financial assets
Cash and cash equivalents(1)
Restricted cash
Trade and other receivables
Long-term portion of finance lease receivables
Long-term portion of loan receivable(2)
Other investments
Risk management assets
Current
Long-term
Financial liabilities
Bank overdraft
Accounts payable and accrued liabilities
Dividends payable
Risk management liabilities
Current
Long-term
Credit facilities, long-term debt and lease
liabilities(3)
Exchangeable securities
(1) Includes cash equivalents of nil.
(2) Included in other assets. Refer to Note 23.
(3) Includes current portion.
—
—
—
—
—
—
—
—
—
—
—
271
76
—
—
—
—
—
—
—
—
709
161
—
—
—
858
257
—
—
1,134
70
1,589
129
33
—
—
—
16
1,346
68
—
—
3,653
739
—
—
—
—
—
11
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
Total
1,134
70
1,589
129
33
12
709
161
16
1,346
68
1,129
333
3,653
739
TransAlta Corporation • 2022 Integrated Report
F43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Carrying value as at Dec. 31, 2021
Financial assets
Cash and cash equivalents(1)
Restricted cash
Trade and other receivables
Long-term portion of finance lease receivables
Risk management assets
Current
Long-term
Financial liabilities
Accounts payable and accrued liabilities
Dividends payable
Risk management liabilities
Current
Long-term
Credit facilities, long-term debt and lease liabilities(2)
Exchangeable securities
(1) Includes cash equivalents of nil.
(2) Includes current portion.
B. Fair Value of Financial Instruments
Derivatives
used for
hedging
Derivatives
held for
trading
(FVTPL)
Amortized
cost
Total
—
—
—
—
36
252
—
—
—
—
—
—
—
—
—
—
272
147
—
—
261
145
—
—
947
70
651
185
—
—
689
62
—
—
947
70
651
185
308
399
689
62
261
145
3,267
3,267
735
735
The fair value of a financial instrument is the price that would be received when selling the asset or paid to
transfer the associated liability in an orderly transaction between market participants at the measurement
date. Fair values can be determined by observing quoted prices for the instrument in active markets to which
the Company has access. In the absence of an active market, the Company determines fair values based on
valuation models or by reference to other similar products in active markets.
Fair values determined using valuation models require the use of assumptions. In determining those
assumptions, the Company looks primarily to external readily observable market inputs. However, if not
available, the Company uses inputs that are not based on observable market data.
I. Level I, II and III Fair Value Measurements
The Level I, II and III classifications in the fair value hierarchy utilized by the Company are defined below. The
fair value measurement of a financial instrument is included in only one of the three levels, the determination
of which is based on the lowest level input that is significant to the derivation of the fair value. The Level III
classification is the lowest level classification in the fair value hierarchy.
a. Level I
Fair values are determined using inputs that are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the Company has the ability to access at the measurement date. In determining Level I
fair values, the Company uses quoted prices for identically traded commodities obtained from active
exchanges such as the New York Mercantile Exchange.
b. Level II
Fair values are determined, directly or indirectly, using inputs that are observable for the asset or liability.
Fair values falling within the Level II category are determined through the use of quoted prices in active
markets, which in some cases are adjusted for factors specific to the asset or liability, such as basis, credit
valuation and location differentials.
TransAlta Corporation • 2022 Integrated Report
F44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s commodity risk management Level II financial instruments include over-the-counter
derivatives with values based on observable commodity futures curves and derivatives with inputs validated
by broker quotes or other publicly available market data providers. Level II fair values are also determined
using valuation techniques, such as option pricing models and interpolation formulas, where the inputs are
readily observable.
In determining Level II fair values of other risk management assets and liabilities, the Company uses
observable inputs other than unadjusted quoted prices that are observable for the asset or liability, such as
interest rate yield curves and currency rates. For certain financial instruments where insufficient trading
volume or lack of recent trades exists, the Company relies on similar interest or currency rate inputs and other
third-party information such as credit spreads.
c. Level III
Fair values are determined using inputs for the assets or liabilities that are not readily observable.
The Company may enter into commodity transactions for which market-observable data is not available. In
these cases, Level III fair values are determined using valuation techniques such as mark-to-forecast and
mark-to-model. For mark-to-model valuations, derivative pricing models, regression-based models and
scenario analysis simulation models may be employed. The model inputs may be based on historical data
such as unit availability, transmission congestion, demand profiles for individual non-standard deals and
structured products and/or volatility and correlations between products derived from historical price
relationships. For assets and liabilities that are recognized at fair value on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of
each reporting period.
The Company also has various commodity contracts with terms that extend beyond a liquid trading period. As
forward market prices are not available for the full period of these contracts, the value of these contracts is
derived by reference to a forecast that is based on a combination of external and internal fundamental
modelling, including discounting. As a result, these contracts are classified in Level III.
II. Commodity Risk Management Assets and Liabilities
Commodity risk management assets and liabilities include risk management assets and liabilities that are used
in the energy marketing and generation segments in relation to trading activities and certain contracting
activities. To the extent applicable, changes in net risk management assets and liabilities for non-hedge
positions are reflected within earnings of these businesses.
Commodity risk management assets and liabilities classified by fair value levels as at Dec. 31, 2022, are as
follows: Level I – $23 million net asset (2021 – $12 million net asset), Level II – $173 million net asset (2021 –
$122 million net asset) and Level III – $782 million net liability (2021 – $159 million net asset).
Significant changes in commodity net risk management assets (liabilities) during the year ended Dec. 31,
2022, are primarily attributable to volatility in market prices across multiple markets on both existing
contracts and new contracts as well as contract settlements.
TransAlta Corporation • 2022 Integrated Report
F45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the key factors impacting the fair value of the Level III commodity risk
management assets and liabilities by classification during the years ended Dec. 31, 2022 and 2021,
respectively:
Year ended Dec. 31, 2022
Year ended Dec. 31, 2021
Opening balance
Changes attributable to:
Hedge
285
Non-
hedge
(126)
Total
159
Hedge
573
Market price changes on existing contracts
Market price changes on new contracts
(611)
—
(298)
(124)
(909)
(124)
(181)
—
(134)
Contracts settled
Change in foreign exchange rates
(38)
118
17
(5)
80
12
(107)
—
(5)
—
Non-
hedge
9
4
Total
582
(177)
(134)
(112)
—
Net risk management assets (liabilities) at end of
year
Additional Level III information:
(347)
(435)
(782)
285
(126)
159
Losses recognized in other comprehensive loss
(594)
—
(594)
(181)
—
(181)
Total gains (losses) included in earnings (loss)
before income taxes
Unrealized gains (losses) included in earnings
(loss) before income taxes relating to net assets
held at year end
38
(427)
(389)
107
(130)
(23)
—
(309)
(309)
—
(135)
(135)
The Company has a Commodity Exposure Management Policy that governs both the commodity transactions
undertaken in its proprietary trading business and those undertaken to manage commodity price exposures in
its generation business. This Policy defines and specifies the controls and management responsibilities
associated with commodity trading activities, as well as the nature and frequency of required reporting of
such activities.
The Company's risk management department determines methodologies and procedures regarding
commodity risk management Level III fair value measurements. Level III fair values are primarily calculated
within the Company’s energy trading risk management system. These calculations are based on underlying
contractual data as well as observable and non-observable inputs. Development of non-observable inputs
requires the use of judgment. To ensure reasonability, system-generated Level III fair value measurements
are reviewed and validated by the risk management and finance departments. Review occurs formally on a
quarterly basis or more frequently if daily review and monitoring procedures identify unexpected changes to
fair value or changes to key parameters.
As at Dec. 31, 2022, the total Level III risk management asset balance was $31 million (2021 – $305 million)
and Level III risk management liability balance was $813 million (2021 – $146 million). The fair value of the
level III long-term power sale - US contract as well as the long-term wind energy sales contracts have
decreased mainly due to higher projected market prices within the next two years. The information on risk
management contracts or groups of risk management contracts that are included in Level III measurements
and the related unobservable inputs and sensitivities are outlined in the following table. These include the
effects on fair value of discounting, liquidity and credit value adjustments; however, the potential offsetting
effects of Level II positions are not considered. Sensitivity ranges for the base fair values are determined
using reasonably possible alternative assumptions for the key unobservable inputs, which may include
forward commodity prices, volatility in commodity prices and correlations, delivery volumes, escalation rates
and cost of supply.
TransAlta Corporation • 2022 Integrated Report
F46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at
Description
Long-term power
sale – US
Coal
transportation –
US
Full requirements
– Eastern US
Long-term wind
energy sale –
Eastern US
Long-term wind
energy sale –
Canada
Long-term wind
energy sale -
Central US
Others
Dec. 31, 2022
Sensitivity
+15
-163
Valuation
technique
Long-term
price forecast
Unobservable input
Reasonably possible change
Illiquid future power prices (per MWh)
Illiquid future power prices (per MWh)
Price decrease of US$5 or price
increase of US$55
Price decrease of US$5 or price
increase of US$55
Numerical
derivative
valuation
Scenario
analysis(1)
+14
-13
+3
-21
+22
Long-term
price forecast
-18
Long-term
price forecast
Long-term
price forecast
+47
-25
+74
-28
+18
-19
Volatility
Rail rate escalation
Volume
80% to 120%
zero to 10%
96% to 104%
Cost of supply
Decrease of $0.50 per MWh or
increase of $3.30 per MWh
Illiquid future power prices (per MWh)
Illiquid future REC prices (per unit)
Price decrease or increase of
US$6
Price decrease or increase of
US$2
Wind discounts
0% decrease or 5% increase
Illiquid future power prices (per MWh)
Price decrease of C$85 or increase
of C$5
Wind discounts
28% decrease or 5% increase
Illiquid future power prices (per MWh)
Price decrease or increase of
US$2
Wind discounts
2% decrease or 5% increase
(1) The valuation technique for Full requirements - Eastern US was updated to scenario analysis to provide a more representative description
and did not result in changes to the value.
TransAlta Corporation • 2022 Integrated Report
F47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at
Dec. 31, 2021
Description
Sensitivity
Valuation
technique
Unobservable input
Reasonably possible change
Long-term power
sale – US
Coal
transportation –
US
Full requirements
– Eastern US
Long-term wind
energy sale –
Eastern US
Long-term wind
energy sale –
Canada
Long-term wind
energy sale –
Central US
Others
+22
-145
Long-term
price forecast
Numerical
derivative
valuation
Historical
Bootstrap
Long-term
price forecast
Long-term
price forecast
Long-term
price forecast
+3
-18
+9
-9
+17
-16
+21
-11
+27
-15
+6
-6
Illiquid future power prices (per MWh)
Illiquid future power prices (per MWh)
Price decrease of US$3 or a price
increase of US$20
Price decrease of US$3 or a price
increase of US$20
Volatility
Rail rate escalation
Volume
80% to 120%
zero to 4%
95% to 105%
Cost of supply
(+/-) US$1 per MWh
Illiquid future power prices (per MWh)
Illiquid future REC prices (per unit)
Illiquid future power prices (per MWh)
Price increase or decrease of
US$6
Price decrease US$3 or increase
of US$2
Price decrease of C$24 or
increase of C$5
Wind discounts
5% decrease or 5% increase
Illiquid future power prices (per MWh)
Price decrease of US$2 or
increase of US$3
Wind discounts
3% decrease or 3% increase
i. Long-Term Power Sale – US
The Company has a long-term fixed price power sale contract in the US for delivery of power at the following
capacity levels: 380 MW through Dec. 31, 2024, and 300 MW through Dec. 31, 2025. The contract is
designated as an all-in-one cash flow hedge.
For periods beyond 2024, market forward power prices are not readily observable. For these periods,
fundamental-based forecasts and market indications have been used to determine proxies for base, high and
low power price scenarios. The base price forecast has been developed by using a fundamental-based
forecast (the provider is an independent and widely accepted industry expert for scenario and planning
views).
The contract is denominated in US dollars. The US dollar relative to the Canadian dollar strengthened from
Dec. 31, 2021, to Dec. 31, 2022, resulting in a decrease in the base fair value and an increase in the sensitivity
values by approximately $21 million and $9 million, respectively. The fair value of this contract at Dec. 31,
2022, decreased mainly due to higher forward power prices compared to previously estimated prices.
ii. Coal Transportation – US
The Company has a coal rail transport agreement that includes an upside sharing mechanism until Dec. 31,
2025. Option pricing techniques have been utilized to value the obligation associated with this component of
the agreement.
The key unobservable inputs used in the valuation include non-liquid power prices, option volatility and rail
rate escalation. For periods beyond 2024, market forward power prices are not readily observable. For these
periods, fundamental-based forecasts and market indications have been used to determine proxies for base,
high and low power price scenarios. The base price forecast has been developed by using a fundamental-
based forecast (the provider is an independent and widely accepted industry expert for scenario and planning
views). Option volatility and rail rate escalation ranges have been determined based on historical data and
professional judgment.
TransAlta Corporation • 2022 Integrated Report
F48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
iii. Full Requirements – Eastern US
The Company has a portfolio of full requirement service contracts, whereby the Company agrees to supply
specific utility customer needs for a range of products that may include electrical energy, capacity,
transmission, ancillary services, renewable energy credits ("RECs") and independent system operator costs.
The key unobservable inputs used in the portfolio valuation include delivered volume and supply cost. Hourly
shaping of consumption will result in a realized cost that may be at a premium (or discount) relative to the
average settled price.
iv. Long-Term Wind Energy Sale – Eastern US
The Company entered into a long-term contract for differences ("CFD") for the offtake of 100 per cent of the
generation from its 90 MW Big Level wind facility. The CFD, together with the sale of electricity generated
into the PJM Interconnection at the prevailing real-time energy market price, achieve the fixed contract price
per MWh on proxy generation. Under the CFD, if the market price is lower than the fixed contract price the
customer pays the company the difference and if the market price is higher than the fixed contract price the
Company refunds the difference to the customer. The customer is also entitled to the physical delivery of
environmental attributes. The contract matures in December 2034. The contract is accounted for as a
derivative. Changes in fair value are presented in revenue.
The key unobservable inputs used in the valuation of the contract are expected proxy generation volumes
and non-liquid forward prices for power, RECs and wind discounts.
v. Long-Term Wind Energy Sale – Canada
The Company entered into two VPPAs for the offtake of 100 per cent of the generation from its 130 MW
Garden Plain wind project. The VPPAs, together with the sale of electricity generated into the Alberta power
market at the pool price, achieve the fixed contract prices per MWh. Under the VPPAs, if the pool price is
lower than the fixed contract price the customer pays the Company the difference and if the pool price is
higher than the fixed contract price the Company refunds the difference to the customer. The customer is
also entitled to the physical delivery of environmental attributes. Both VPPAs commence on commercial
operation of the facility and extend for a weighted average of approximately 17 years. The commercial
operation date is expected to be in 2023.
In addition to the VPPAs, the Company has entered into a bridge contract that initially was for 16 months from
Sept. 1, 2021, through Dec. 31, 2022, and will remain in effect at one of the VPPAs price until the commercial
operation date is achieved. The customer is also entitled to the physical delivery of environmental attributes.
The energy component of these contracts is accounted for as derivatives. Changes in fair value are
presented in revenue.
The key unobservable inputs used in the valuations of the contracts are the non-liquid forward prices for
power and monthly wind discounts.
Under a separate agreement, Pembina Pipeline Corporation ("Pembina") has the option to purchase a 37.7 per
cent equity interest in the project. The option can be exercised no later than 30 days after Pembina receives
notice of the commercial operational date.
vi. Long-Term Wind Energy Sale – Central US
The Company entered into two long-term VPPAs for the offtake of 100 per cent of the generation from its
300 MW White Rock East and White Rock West wind power projects. The VPPAs, together with the sale of
electricity generated into the US Southwest power market at the pool price, achieve the fixed contract prices
per MWh. Under the VPPAs, if the pool price is lower than the fixed contract price the customer pays the
Company the difference and if the pool price is higher than the fixed contract price the Company refunds the
difference to the customer. The customer is also entitled to the physical delivery of environmental attributes.
The VPPAs commence on commercial operation of the facilities, which is expected within the second half of
2023.
TransAlta Corporation • 2022 Integrated Report
F49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company entered into a long-term VPPA for the offtake of 100 per cent of the generation from its 200
MW Horizon Hill wind project. The VPPA, together with the sale of electricity generated into the US Southwest
power market at the pool price, achieve the fixed contract prices per MWh. Under the VPPA, if the pool price
is lower than the fixed contract price the customer pays the Company the difference and if the pool price is
higher than the fixed contract price the Company refunds the difference to the customer. The customer is
also entitled to the physical delivery of environmental attributes. The VPPA commences on commercial
operation of the facility, which is expected within the second half of 2023.
The energy component of these contracts is accounted for as derivatives. Changes in fair value are
presented in revenue.
The key unobservable inputs used in the valuation of the contracts are the non-liquid forward prices for
power and wind discounts.
III. Other Risk Management Assets and Liabilities
Other risk management assets and liabilities primarily include risk management assets and liabilities that are
used in managing exposures on non-energy marketing transactions such as interest rates, the net investment
in foreign operations and other foreign currency risks. Hedge accounting is not always applied.
Other risk management assets and liabilities with a total net liability fair value of $6 million as at Dec. 31, 2022
(2021 – $8 million net asset) are classified as Level II fair value measurements. The changes in other net risk
management assets and liabilities during the year ended Dec. 31, 2022, are primarily attributable to
unfavourable market price changes on existing contracts and unfavourable foreign exchange rates on new
contracts entered into during 2022.
IV. Other Financial Assets and Liabilities
The fair value of financial assets and liabilities measured at other than fair value is as follows:
Exchangeable securities — Dec. 31, 2022
Long-term debt — Dec. 31, 2022
Loan receivable — Dec. 31, 2022
Exchangeable securities — Dec. 31, 2021
Long-term debt — Dec. 31, 2021
Loan receivable — Dec. 31, 2021
(1) Includes current portion.
Fair value(1)
Level I
Level II
Level III
—
—
—
—
—
—
685
3,200
37
770
3,272
55
—
—
—
—
—
—
Total
carrying
value(1)
739
Total
685
3,200
3,518
37
770
37
735
3,272
3,167
55
55
The fair values of the Company’s debentures, senior notes and exchangeable securities are determined using
prices observed in secondary markets. Non-recourse and other long-term debt fair values are determined by
calculating an implied price based on a current assessment of the yield to maturity.
The carrying amount of other short-term financial assets and liabilities (cash and cash equivalents, restricted
cash, trade accounts receivable, collateral provided, bank overdraft, accounts payable and accrued liabilities,
collateral held and dividends payable) approximates fair value due to the liquid nature of the asset or liability.
The fair values of the finance lease receivables (see Note 17) approximate the carrying amounts as the
amounts receivable represent cash flows from repayments of principal and interest.
TransAlta Corporation • 2022 Integrated Report
F50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
C. Inception Gains and Losses
The majority of derivatives traded by the Company are based on adjusted quoted prices on an active
exchange or extend beyond the time period for which exchange-based quotes are available. The fair values
of these derivatives are determined using inputs that are not readily observable. Refer to section B of this
Note 14 above for fair value Level III valuation techniques used. In some instances, a difference may arise
between the fair value of a financial instrument at initial recognition (the “transaction price”) and the amount
calculated through a valuation model. This unrealized gain or loss at inception is recognized in net earnings
(loss) only if the fair value of the instrument is evidenced by a quoted market price in an active market,
observable current market transactions that are substantially the same, or a valuation technique that uses
observable market inputs. Where these criteria are not met, the difference is deferred on the Consolidated
Statements of Financial Position in risk management assets or liabilities and is recognized in net earnings
(loss) over the term of the related contract. The difference between the transaction price and the fair value
determined using a valuation model, yet to be recognized in net earnings (loss) and a reconciliation of
changes is as follows:
As at Dec. 31
Unamortized net gain (loss) at beginning of year(1)
New inception loss(2)
Change in foreign exchange rates
Amortization recorded in net earnings during the year
Unamortized net loss at end of year
2022
2021
2020
(131)
(37)
(10)
(35)
(33)
(79)
—
(19)
(213)
(131)
9
(13)
—
(29)
(33)
(1) In 2022, the day one valuation of certain PPAs in 2021 was revised for consistency with other fair value calculations. The reconciliation
for the 2021 comparative period was restated. This did not impact the prior year financial statements as the inception completely offset
the fair value at Dec. 31, 2021.
(2) During 2022, the Company entered into a PPA for the Horizon Hill wind project (2021 – PPAs for the White Rock wind project) that
resulted in a new inception loss due to the difference between the fixed PPA price and future estimated market prices. There are other
key factors, such as project economics and incentives, that influence the long-term power price for renewable projects outside of the
power price curve, which is not liquid for the majority of the duration of the PPA. During 2020, the Company entered into a coal rail
transportation agreement that includes an upside sharing mechanism. Option pricing techniques have been utilized to value the obligation
associated with this component of the deal.
15. Risk Management Activities
A. Risk Management Strategy
The Company is exposed to market risk from changes in commodity prices, foreign exchange rates, interest
rates, credit risk and liquidity risk. These risks affect the Company’s earnings and the value of associated
financial instruments that the Company holds. In certain cases, the Company seeks to minimize the effects of
these risks by using derivatives to hedge its risk exposures. The Company’s risk management strategy,
policies and controls are designed to ensure that the risks it assumes comply with the Company’s internal
objectives and its risk tolerance.
The Company has two primary streams of risk management activities: (i) financial exposure management; and
(ii) commodity exposure management. Within these activities, risks identified for management include
commodity risk, interest rate risk, liquidity risk, equity price risk and foreign currency risk.
The Company seeks to minimize the effects of commodity risk, interest rate risk and foreign currency risk by
using derivative financial instruments to hedge risk exposures. Of these derivatives, the Company may apply
hedge accounting to those hedging commodity price risk, interest rate risk and foreign currency risk.
The use of financial derivatives is governed by the Company’s policies approved by the Board, which provide
written principles on commodity risk, interest rate risk, liquidity risk, equity price risk and foreign currency risk,
as well as the use of financial derivatives and non-derivative financial instruments.
Liquidity risk, credit risk and equity price risk are managed through means other than derivatives or hedge
accounting.
TransAlta Corporation • 2022 Integrated Report
F51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company enters into various derivative transactions as well as other contracting activities that do not
qualify for hedge accounting or where a choice was made not to apply hedge accounting. As a result, the
related assets and liabilities are classified as derivatives at fair value through profit and loss. The net realized
and unrealized gains or losses from changes in the fair value of these derivatives are reported in net earnings
in the period the change occurs.
The Company designates certain derivatives as hedging instruments to hedge commodity price risk, foreign
currency exchange risk in cash flow hedges and hedges of net investments in foreign operations. Hedges of
foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging
instrument and the hedged item, along with its risk management objectives and its strategy for undertaking
various hedge transactions. At the inception of the hedge and on an ongoing basis, the Company also
documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of
the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the
following hedge effectiveness requirements:
•
•
•
There is an economic relationship between the hedged item and the hedging instrument;
The effect of credit risk does not dominate the value changes that result from that economic
relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Company actually hedges and the quantity of the hedging instrument that the
entity actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio, but
the risk management objective for that designated hedging relationship remains the same, the Company
adjusts the hedge ratio of the hedging relationship so that it continues to meet the qualifying criteria.
B. Net Risk Management Assets and Liabilities
Aggregate net risk management assets (liabilities) are as follows:
As at Dec. 31, 2022
Commodity risk management
Current
Long-term
Net commodity risk management liabilities
Other
Current
Long-term
Net other risk management liabilities
Cash flow
hedges
Not
designated
as a hedge
Total
(271)
(143)
(76)
(96)
(414)
(172)
(347)
(239)
(586)
—
—
—
(6)
—
(6)
(6)
—
(6)
Total net risk management liabilities
(347)
(245)
(592)
TransAlta Corporation • 2022 Integrated Report
F52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at Dec. 31, 2021
Commodity risk management
Current
Long-term
Net commodity risk management assets
Other
Current
Long-term
Net other risk management assets
Cash flow
hedges
Not
designated
as a hedge
33
252
285
3
—
3
12
(4)
8
(1)
6
5
Total
45
248
293
2
6
8
Total net risk management assets
288
13
301
Netting Arrangements
Information about the Company’s financial assets and liabilities that are subject to enforceable master netting
arrangements or similar agreements is as follows:
As at Dec. 31, 2022
Gross amounts of
recognized
financial assets
(liabilities)
Amounts set
off
Net amounts
presented on the
statement of
financial position
Master netting
arrangements(1)
Net
amount
Current risk management assets $
1,602 $
(883) $
688 $
(62) $
626
Long-term risk management
assets
Current risk management
liabilities
Long-term risk management
liabilities
Trade and other receivables(2)
Accounts payable and accrued
liabilities(2)
$
$
$
$
$
204 $
(43) $
157 $
(7) $
150
(1,953) $
883 $
(1,033) $
62 $
(971)
(449) $
43 $
(402) $
7 $
(395)
1,330 $
(934) $
396 $
(176) $
220
(1,344) $
934 $
(411) $
176 $
(235)
As at Dec. 31, 2021
Gross amounts of
recognized
financial assets
(liabilities)
Amounts set
off
Net amounts
presented on the
statement of
financial position
Master netting
arrangements(1) Net amount
Current risk management assets $
636 $
(307) $
316 $
(92) $
224
Long-term risk management
assets
Current risk management
liabilities
Long-term risk management
liabilities
Trade and other receivables(2)
Accounts payable and accrued
liabilities(2)
$
$
$
$
$
285 $
(16) $
260 $
(23) $
237
(529) $
307 $
(211) $
92 $
(119)
(89) $
16 $
(70) $
23 $
(47)
699 $
(571) $
128 $
(35) $
93
(689) $
571 $
(118) $
35 $
(83)
(1) Amounts not set off in the Consolidated Statements of Financial Position.
(2) The trade and other receivables and accounts payable and accrued liabilities include amounts related to collateral provided and held.
Refer to Note 15(F) below for further details.
TransAlta Corporation • 2022 Integrated Report
F53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
C. Nature and Extent of Risks Arising from Financial Instruments
I. Market Risk
a. Commodity Price Risk Management
The Company has exposure to movements in certain commodity prices in both its electricity generation and
proprietary trading businesses, including the market price of electricity and fuels used to produce electricity.
Most of the Company’s electricity generation and related fuel supply contracts are considered to be contracts
for delivery or receipt of a non-financial item in accordance with the Company’s expected own use
requirements and are not considered to be financial instruments. As such, the discussion related to
commodity price risk is limited to the Company’s proprietary trading business, the VPPAs and other long-term
contracts that are derivatives and commodity derivatives used in hedging relationships associated with the
Company’s electricity generating activities.
To mitigate the risk of adverse commodity price changes, the Company uses three tools:
•
•
•
A framework of risk controls;
A predefined hedging plan, including fixed price financial power swaps and long-term physical power
sale contracts to hedge commodity price for electricity generation; and
A committee dedicated to overseeing the risk and compliance program in trading and ensuring the
existence of appropriate controls, processes, systems and procedures to monitor adherence to the
program.
The Company has executed commodity price hedges for its Centralia thermal facility, including a long-term
physical power sale contract, and may, at times, execute hedges for its portfolio of merchant power exposure
in Alberta using fixed price financial swaps or other similar instruments. Both hedging strategies fall under the
Company’s risk management strategy used to hedge commodity price risk.
Market risk exposures are measured using Value at Risk ("VaR") supplemented by sensitivity analysis. There
has been no change to the Company’s exposure to market risks or the manner in which these risks are
managed or measured. Position sizes and trade strategies were adjusted to remain within the Company's risk
framework.
i. Commodity Price Risk Management – Proprietary Trading
The Company’s Energy Marketing segment conducts proprietary trading activities and uses a variety of
instruments to manage risk, earn trading revenue and gain market information.
In compliance with the Commodity Exposure Management Policy, proprietary trading activities are subject to
limits and controls, including VaR limits. The Board approves the limit for total VaR from proprietary trading
activities. VaR is the most commonly used metric employed to track and manage the market risk associated
with trading positions. A VaR measure gives, for a specific confidence level, an estimated maximum pre-tax
loss that could be incurred over a specified period of time. VaR is used to determine the potential change in
value of the Company’s proprietary trading portfolio, over a three-day period within a 95 per cent confidence
level, resulting from normal market fluctuations. VaR is estimated using the historical variance/covariance
approach. VaR is a measure that has certain inherent limitations. The use of historical information in the
estimate assumes that price movements in the past will be indicative of future market risk. As such, it may
only be meaningful under normal market conditions. Extreme market events are not addressed by this risk
measure. In addition, the use of a three-day measurement period implies that positions can be unwound or
hedged within three days, although this may not be possible if the market becomes illiquid.
Changes in market prices associated with proprietary trading activities affect net earnings in the period that
the price changes occur. VaR at Dec. 31, 2022, associated with the Company’s proprietary trading activities
was $4 million (2021 – $2 million, 2020 – $1 million).
ii. Commodity Price Risk – Generation
The generation segments utilize various commodity contracts to manage the commodity price risk associated
with electricity generation, fuel purchases, emissions and byproducts, as considered appropriate. A
Commodity Exposure Management Policy is prepared and approved annually, which outlines the intended
hedging strategies associated with the Company’s generation assets and related commodity price risks.
Controls also include restrictions on authorized instruments, management reviews on individual portfolios and
approval of asset transactions that could add potential volatility to the Company’s reported net earnings.
TransAlta Corporation • 2022 Integrated Report
F54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
VaR at Dec. 31, 2022, associated with the Company’s commodity derivative instruments used in generation
hedging activities was $97 million (2021 – $33 million, 2020 – $12 million). For positions and economic hedges
that do not meet hedge accounting requirements or for short-term optimization transactions such as
buybacks entered into to offset existing hedge positions, these transactions are marked to the market value
with changes in market prices associated with these transactions affecting net earnings in the period in which
the price change occurs. VaR at Dec. 31, 2022, associated with these transactions was $54 million (2021 –
$51 million, 2020 – $15 million), of which $26 million related to VPPAs (2021 – $14 million, 2020 – $3 million).
iii. Commodity Price Risk Management – Hedges
At Dec. 31, 2022, the Company had no outstanding commodity derivative instruments designated as hedging
instruments, except for the long-term power sale - US contract. For further details on this contract, refer to
Note 14(B)(II)(i).
iv. Commodity Price Risk Management – Non-Hedges
The Company’s outstanding commodity derivative instruments not designated as hedging instruments are as
follows:
As at Dec. 31
Type
(thousands)
Electricity (MWh)
Natural gas (GJ)
Transmission (MWh)
Emissions (MWh)
Emissions (tonnes)
Coal (tonnes)
2022
2021
Notional
amount
sold
Notional
amount
purchased
Notional
amount
sold
Notional
amount
purchased
55,821
13,934
46,139
14,951
23,464
162,384
7,501
173,898
—
274
300
—
1,643
2,297
300
7,746
37
1,097
445
2,030
350
350
—
9,352
b. Interest Rate Risk Management
Changes in interest rates can impact the Company’s borrowing costs and cost of capital. Changes in the cost
of capital could affect the feasibility of new growth initiatives. Interest rate risk also arises as the fair value of
future cash flows from a financial instrument fluctuates because of changes in market interest rates.
The Company's credit facility, Term Facility ("Term Facility") and the Poplar Creek non-recourse bond are the
only debt instruments subject to floating interest rates, which represent 15 per cent of the Company’s total
long-term debt as at Dec. 31, 2022 (2021 – 3 per cent). Interest rate risk is managed with the use of
derivatives.
The Company's outstanding interest rate derivative instruments are as follows:
The Company entered into two interest rate swaps agreements in October 2022 for $100 million each to
manage interest rate risk related to a portion of its Term Facility. The Company pays a fixed blended rate of
4.70 per cent and receives one month Canadian Dollar Offered Rate ("CDOR") that resets monthly. The
maturity date is Nov. 10, 2023.
Interest rate swap agreements with a notional amount of US$150 million referencing the three-month London
Interbank Offered Rate were replaced with swap agreements referencing the Secured Overnight Financing
Rate ("SOFR"). These swaps were settled in 2022. In addition, the US$150 million bond lock agreement
outstanding at Dec. 31, 2021, was settled in 2022.
Interbank Offered Rate reform could impact interest rate risk with respect to the Company's credit facilities
and the Poplar Creek non-recourse bond held by a TransAlta subsidiary. The credit facilities with $433 million
outstanding (2021 – nil) reference the CDOR for Canadian-dollar drawings, but include appropriate fallback
language to replace this benchmark rate in the event of a benchmark transition. The Poplar Creek non-
recourse bond with a face value as at Dec. 31, 2022 of $95 million (2021 – $104 million) pays interest based
upon the three-month CDOR. Cessation of the three-month CDOR is anticipated to occur mid-2024.
TransAlta Corporation • 2022 Integrated Report
F55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
c. Currency Rate Risk
The Company has exposure to various currencies, such as the US dollar and the Australian dollar, as a result
of investments and operations in foreign jurisdictions, the net earnings from those operations and the
acquisition of equipment and services from foreign suppliers.
The Company may enter into the following hedging strategies to mitigate currency rate risk, including:
•
•
Foreign exchange forward contracts to mitigate adverse changes in foreign exchange rates on
project-related expenditures and distributions received in foreign currencies;
Foreign exchange forward contracts and cross-currency swaps to manage foreign exchange
exposure on foreign-denominated debt not designated as a net investment hedge; and
• Designating foreign currency debt as a hedge of the net investment in foreign operations to mitigate
the risk due to fluctuating exchange rates related to certain foreign subsidiaries.
The Company's target is to hedge a minimum of 60 per cent of our forecasted foreign operating cash flows
over a four-year period, with a minimum of 90 per cent in the current year, 70 per cent in the next year, 50
per cent in the third year and 30 per cent in the fourth year. The US exposure will be managed with a
combination of interest expense on our US-denominated debt and forward foreign exchange contracts and
the Australian exposure will be managed with a combination of interest expense on our Australian-dollar
denominated debt and forward foreign exchange contracts.
i. Net Investment Hedges
When designating foreign currency debt as a hedge of the Company’s net investment in foreign subsidiaries,
the Company has determined that the hedge is effective if the foreign currency of the net investment is the
same as the currency of the hedge and therefore an economic relationship is present.
The Company’s hedges of its net investment in foreign operations were comprised of US-dollar-denominated
long-term debt with a face value of US$370 million (2021 – US$370 million).
ii. Non-Hedges
The Company also uses foreign currency contracts to manage its expected foreign operating cash flows and
foreign exchange forward contracts to manage foreign exchange exposure on foreign-denominated debt not
designated as a net investment hedge. Hedge accounting is not applied to these foreign currency contracts.
As at Dec. 31
Notional
amount
sold
Notional
amount
purchased
2022
Fair value
asset
(liability)
Maturity
Notional
amount
sold
Notional
amount
purchased
Fair value
asset
(liability)
Maturity
2021
Foreign exchange forward contracts – foreign-denominated receipts/expenditures
AU183
CAD168
(1) 2023-2026
AU28
CAD26
(5)
2022-2025
US573
CAD761
(12) 2023-2025
US271
CAD357
8
2022-2025
US66
AU102
4
2023
—
—
—
—
Foreign exchange forward contracts – foreign-denominated debt
CAD159
US120
3
2023
CAD191
US150
1
2022
iii. Impacts of Currency Rate Risk
The possible effect on net earnings and OCI, due to changes in foreign exchange rates associated with
financial instruments denominated in currencies other than the Company’s functional currency, is outlined
below. The sensitivity analysis has been prepared using management’s assessment that an average three
cents (2021 – three cents, 2020 – three cents) increase or decrease in these currencies relative to the
Canadian dollar is a reasonable potential change over the next quarter.
TransAlta Corporation • 2022 Integrated Report
F56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended Dec. 31
2022
2021
2020
Currency
USD
AUD
Total
Net earnings
decrease(1)
OCI gain
(1)(2)
Net earnings
increase
(decrease)(1)
OCI gain
(1)(2)
Net earnings
decrease(1)
OCI gain
(1)(2)
(12)
(2)
(14)
—
—
—
(13)
1
(12)
1
—
1
(8)
(4)
(12)
1
—
1
(1) These calculations assume an increase in the value of these currencies relative to the Canadian dollar. A decrease would have the
opposite effect.
(2) The foreign exchange impact related to financial instruments designated as hedging instruments in net investment hedges has been
excluded.
II. Credit Risk
Credit risk is the risk that customers or counterparties will cause a financial loss for the Company by failing to
discharge their obligations and the risk to the Company associated with changes in creditworthiness of
entities with which commercial exposures exist. The Company actively manages its exposure to credit risk by
assessing the ability of counterparties to fulfil their obligations under the related contracts prior to entering
into such contracts. The Company makes detailed assessments of the credit quality of all counterparties and,
where appropriate, obtains corporate guarantees, cash collateral, third-party credit insurance and/or letters
of credit to support the ultimate collection of these receivables. For commodity trading and origination, the
Company sets strict credit limits for each counterparty and monitors exposures on a daily basis. TransAlta
uses standard agreements that allow for the netting of exposures and often include margining provisions. If
credit limits are exceeded, TransAlta will request collateral from the counterparty or halt trading activities with
the counterparty.
The Company uses external credit ratings, as well as internal ratings in circumstances where external ratings
are not available, to establish credit limits for customers and counterparties. The following table outlines the
Company’s maximum exposure to credit risk without taking into account collateral held, including the
distribution of credit ratings, as at Dec. 31, 2022:
Trade and other receivables(1)(2)
Long-term finance lease receivable
Risk management assets(1)
Loan receivable(2)
Total
Investment
grade
(Per cent)
Non-
investment
grade
(Per cent)
Total
(Per cent)
87
100
92
—
13
—
8
100
100
100
100
100
Total
amount
1,585
129
870
37
2,621
(1) Letters of credit and cash and cash equivalents are the primary types of collateral held as security related to these amounts.
(2) Includes $37 million loan receivable included within other assets with a counterparty that has no external credit rating. The current
portion of $4 million was excluded from trade and other receivables as it is included in loan receivable in the table above. Refer to Note
23 for further details.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses. The provision rates are based on segment historical rates of default of trade receivables as well
as incorporating forward-looking credit ratings and forecasted default rates. In addition to the calculation of
expected credit losses, TransAlta monitors key forward-looking information as potential indicators that
historical bad debt percentages, forward-looking S&P credit ratings and forecasted default rates would no
longer be representative of future expected credit losses. The calculation reflects the probability-weighted
outcome, the time value of money and reasonable and supportable information that is available at the
reporting date about past events, current conditions and forecasts of future economic conditions. TransAlta
evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in
several jurisdictions and industries.
The Company did not have significant expected credit losses as at Dec. 31, 2022.
TransAlta Corporation • 2022 Integrated Report
F57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s maximum exposure to credit risk at Dec. 31, 2022, without taking into account collateral held
or right of set-off, is represented by the current carrying amounts of receivables and risk management assets
as per the Consolidated Statements of Financial Position. Letters of credit and cash are the primary types of
collateral held as security related to these amounts. The maximum credit exposure to any one customer for
commodity trading operations and hedging, including the fair value of open trading, net of any collateral held,
at Dec. 31, 2022, was $64 million (2021 – $37 million).
III. Liquidity Risk
Liquidity risk relates to the Company’s ability to access capital to be used for capital projects, debt
refinancing, proprietary trading activities, commodity hedging and general corporate purposes. As at Dec. 31,
2022, TransAlta maintains an investment grade rating from one credit rating agency and below investment
grade ratings from two credit rating agencies. Between 2023 and 2025, the Company has approximately
$839 million of debt maturing, comprised of approximately $400 million of recourse debt, with the balance
mainly related to scheduled non-recourse debt repayments.
Collateral is posted based on negotiated terms with counterparties, which can include the Company’s senior
unsecured credit rating as determined by certain major credit rating agencies. Certain of the Company’s
derivative instruments contain financial assurance provisions that require collateral to be posted only if a
material adverse credit-related event occurs.
TransAlta manages liquidity risk by monitoring liquidity on trading positions; preparing and revising longer-
term financing plans to reflect changes in business plans and the market availability of capital; reporting
liquidity risk exposure for proprietary trading activities on a regular basis to the Risk Management Committee,
senior management and the Audit, Finance and Risk Committee (on behalf of the Board); and maintaining
sufficient undrawn committed credit lines to support potential liquidity requirements. The Company does not
use derivatives or hedge accounting to manage liquidity risk.
TransAlta Corporation • 2022 Integrated Report
F58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A maturity analysis of the Company's financial liabilities as well as financial assets that are expected to
generate cash inflows to meet cash outflows on financial liabilities, is as follows:
2023
2024
2025
2026
2027
2028 and
thereafter
Total
Bank overdraft
Accounts payable and accrued liabilities
Long-term debt(1)
16
1,346
—
—
Credit facilities(1)
Debentures
Senior notes
Non-recourse — Hydro
Non-recourse — Wind & Solar
Non-recourse — Gas
Tax equity financing
Other
Exchangeable securities(2)
Commodity risk management (assets)
liabilities
Other risk management (assets) liabilities
Lease liabilities(3)
Interest on long-term debt and lease
liabilities(4)
Interest on exchangeable securities(2)(4)
Dividends payable
Total
—
—
—
—
—
—
69
58
15
—
750
—
—
—
45
63
45
16
1
—
400
—
—
—
66
46
15
—
—
415
182
(42)
7
(7)
(1)
4
1
4
—
—
33
—
—
—
67
61
16
—
—
15
—
3
—
—
—
—
—
—
70
65
19
—
—
8
—
4
—
16
—
1,346
—
251
949
—
433
251
949
45
363
698
782
1,057
48
—
—
8
(1)
129
1
750
586
6
127
135
205
192
166
158
150
836
1,707
52
68
62
—
—
—
—
—
—
—
—
—
114
68
2,272
966
1,021
353
316
3,363
8,291
(1) Excludes impact of hedge accounting and derivatives.
(2) The exchangeable securities can be exchanged, at the earliest, on Jan. 1, 2025. Refer to Note 26 for further details.
(3) Lease liabilities include a lease incentive of $12 million expected to be received in 2023.
(4) Not recognized as a financial liability on the Consolidated Statements of Financial Position.
IV. Equity Price Risk
Total Return Swaps
The Company has certain compensation, deferred and restricted share unit programs, the values of which
depend on the common share price of the Company. The Company has fixed a portion of the settlement cost
of these programs by entering into a total return swap for which hedge accounting has not been applied. The
total return swap is cash settled every quarter based upon the difference between the fixed price and the
market price of the Company’s common shares at the end of each quarter.
D. Hedging Instruments – Uncertainty of Future Cash Flows
The following table outlines the terms and conditions of derivative hedging instruments and how they affect
the amount, timing and uncertainty of future cash flows:
Maturity
2023
2024
2025
2026
2027
2028
Cash flow hedges
Commodity derivative instruments
Electricity
Notional amount (thousands of MWh)
Average price ($ per MWh)
3,329
78.27
3,338
80.22
2,628
82.22
—
—
—
—
—
—
TransAlta Corporation • 2022 Integrated Report
F59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
E. Effects of Hedge Accounting on the Financial Position and Performance
I. Effect of Hedges
The impact of the hedging instruments on the statement of financial position is as follows:
As at Dec. 31, 2022
Commodity price risk
Cash flow hedges
Physical power sales(1)
Foreign currency risk
Net investment hedges
Notional
amount
Carrying
amount
Line item in the
statement of financial
position
Change in fair value
used for measuring
ineffectiveness
9,295
(347)
Risk management
liabilities
(594)
Foreign-denominated debt
US370
CAD502
Credit facilities, long-
term debt and lease
liabilities
—
(1) In thousands of MWh.
As at Dec. 31, 2021
Commodity price risk
Cash flow hedges
Physical power sales(1)
Interest rate risk
Cash flow hedges
Interest rate swap
Foreign currency risk
Cash flow hedges
Notional
amount
Carrying
amount
Line item in the statement
of financial position
Change in fair value
used for measuring
ineffectiveness
12,624
285
Risk management assets
(181)
US300
3
Risk management assets
3
—
—
—
Foreign-denominated expenditures
Foreign-denominated expenditures
US8
US14
— Risk management assets
— Risk management assets
Net investment hedges
Foreign-denominated debt
US370
CAD473 Credit facilities, long-term
debt and lease liabilities
(1) In thousands of MWh.
TransAlta Corporation • 2022 Integrated Report
F60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The impact of the hedged items on the statement of financial position is as follows:
As at Dec. 31
2022
2021
Change in fair value used
for measuring
ineffectiveness
Cash flow
hedge
reserve(1)
Change in fair value used
for measuring
ineffectiveness
Cash flow
hedge
reserve(1)
Commodity price risk
Cash flow hedges
Power forecast sales –
Centralia
Interest rate risk
Cash flow hedges
Interest expense on long-
term debt
Foreign currency risk
Net investment hedges
Net investment in foreign
subsidiaries
(1 Net of tax. Included in AOCI.
(594)
(279)
(181)
226
—
—
3
2
Change in fair value used
for measuring
ineffectiveness
Foreign
currency
translation
reserve(1)
Change in fair value used
for measuring
ineffectiveness
Foreign
currency
translation
reserve(1)
—
(39)
—
(35)
The hedging gain or loss recognized in OCI before tax is equal to the change in fair value used for measuring
effectiveness for the net investment hedge. There is no ineffectiveness recognized in profit or loss.
The impact of designated cash flow hedges on OCI and net earnings is:
Year ended Dec. 31, 2022
Effective portion
Ineffective portion
Derivatives in cash flow
hedging relationships
Pre-tax
gain (loss)
recognized
in OCI
Location of (gain)
loss reclassified
from OCI
Pre-tax
(gain) loss
reclassified
from OCI
Location of (gain) loss
reclassified
from OCI
Pre-tax
(gain) loss
recognized
in earnings
Commodity contracts
(747) Revenue
124 Revenue
Forward starting interest rate
swaps
53
Interest expense
2
Interest expense
OCI impact
(694) OCI impact
126 Net earnings impact
—
—
—
Over the next 12 months, the Company estimates that approximately $208 million of after-tax losses will be
reclassified from AOCI to net earnings. These estimates assume constant natural gas and power prices,
interest rates and exchange rates over time; however, the actual amounts that will be reclassified may vary
based on changes in these factors.
TransAlta Corporation • 2022 Integrated Report
F61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended Dec. 31, 2021
Effective portion
Ineffective portion
Derivatives in cash flow
hedging relationships
Pre-tax
gain (loss)
recognized
in OCI
Location of (gain)
loss reclassified
from OCI
Pre-tax
(gain) loss
reclassified
from OCI
Location of (gain) loss
reclassified
from OCI
Pre-tax
(gain) loss
recognized
in earnings
Commodity contracts
(268) Revenue
(13) Revenue
Foreign exchange forwards
on project hedges
Forward starting interest rate
swaps
Property, plant
and equipment
—
Foreign exchange
(gain) loss
1
13
Interest expense
4
Interest expense
OCI impact
(255) OCI impact
(8) Net earnings impact
—
—
—
—
Year ended Dec. 31, 2020
Effective portion
Ineffective portion
Derivatives in cash flow
hedging relationships
Pre-tax
gain (loss)
recognized
in OCI
Location of (gain)
loss reclassified
from OCI
Pre-tax
(gain) loss
reclassified
from OCI
Location of (gain) loss
reclassified
from OCI
Pre-tax
(gain) loss
recognized
in earnings
Commodity contracts
41 Revenue
(137) Revenue
Foreign exchange forwards
on project hedges
Forward starting interest rate
swaps
Property, plant
and equipment
(1)
Foreign exchange
(gain) loss
—
(12) Interest expense
(4)
Interest expense
OCI impact
28 OCI impact
(141) Net earnings impact
—
—
—
—
II. Effect of Non-Hedges
For the year ended Dec. 31, 2022, the Company recognized a net unrealized loss of $384 million (2021 – gain
of $97 million, 2020 – gain of $43 million) related to commodity derivatives.
For the year ended Dec. 31, 2022, a gain of $20 million (2021 – gain of $6 million, 2020 – gain of $11 million)
related to foreign exchange and other derivatives was recognized, which consists of net unrealized losses of
$11 million (2021 – gain of $4 million, 2020 – loss of $2 million) and net realized gains of $31 million (2021 –
gains of $2 million, 2020 — gains of $13 million), respectively.
F. Collateral
I. Financial Assets Provided as Collateral
At Dec. 31, 2022, the Company provided $304 million (2021 — $55 million) in cash and cash equivalents as
collateral to regulated clearing agents and certain utility customers as security for commodity trading
activities. These funds are held in segregated accounts by the clearing agents. The utility customers are
obligated to pay interest on the outstanding balances. Collateral provided is included within trade and other
receivables in the Consolidated Statements of Financial Position.
II. Financial Assets Held as Collateral
At Dec. 31, 2022, the Company held $260 million (2021 – $18 million) in cash collateral associated with
counterparty obligations. Under the terms of the contracts, the Company may be obligated to pay interest on
the outstanding balances and to return the principal when the counterparties have met their contractual
obligations or when the amount of the obligation declines as a result of changes in market value. Interest
payable to the counterparties on the collateral received is calculated in accordance with each contract.
Collateral held is related to physical and financial derivative transactions in a net asset position and is
included in accounts payable and accrued liabilities in the Consolidated Statements of Financial Position.
TransAlta Corporation • 2022 Integrated Report
F62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
III. Contingent Features in Derivative Instruments
Collateral is posted in the normal course of business based on the Company’s senior unsecured credit rating
as determined by certain major credit rating agencies. Certain of the Company’s derivative instruments
contain financial assurance provisions that require collateral to be posted only if a material adverse credit-
related event occurs. At Dec. 31, 2022, the Company had posted collateral of $820 million (2021 – $356
million) in the form of letters of credit on physical and financial derivative transactions in a net liability
position. Certain derivative agreements contain credit-risk-contingent features, which if triggered could result
in the Company having to post an additional $656 million (2021 – $120 million) of collateral to its
counterparties.
16. Inventory
The components of inventory are as follows:
As at Dec. 31
Parts, materials and supplies
Coal
Emission credits
Natural gas
Total
2022
2021
83
43
27
4
157
82
27
55
3
167
No inventory is pledged as security for liabilities.
During 2022, coal inventory increased primarily due to higher coal inventory volume at Centralia Unit 2 along
with higher coal pricing.
As at Dec. 31, 2022, the Company holds 963,068 emission credits in inventory purchased externally with a
recorded book value of $27 million (Dec. 31, 2021 – 2,033,752 emission credits with a recorded book value of
$55 million). The Company also has approximately 1,869,450 (Dec. 31, 2021 – 1,922,973) of internally
generated eligible emission credits from the Company's Wind and Solar and Hydro segments with no
recorded book value. These emission credits can be used to offset future emission obligations from our gas
facilities located in Canada where the compliance price of carbon is expected to increase, resulting in a
reduced cash cost for carbon compliance. In addition, the Company holds approximately 1,750,000 (Dec. 31,
2021 – 1,750,000) eligible emission performance credits ("EPCs") with no recorded book value generated from
assets formerly subject to the Hydro Power Purchase Arrangement ("Hydro PPA") during the year. The
Balancing Pool is asserting ownership of these EPCs, which the Company has disputed through an arbitration
to be heard in May 2023. Refer to Note 37 for further details.
During 2022, the Company utilized 1,169,333 emission credits with a carrying value of $35 million to settle the
2021 carbon compliance obligation of $47 million. The difference of $12 million has been recognized as a
reduction in the Company's carbon compliance costs in the year.
TransAlta Corporation • 2022 Integrated Report
F63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Finance Lease Receivables
Amounts receivable under the Company’s finance leases associated with the Poplar Creek cogeneration
facility and the Southern Cross Energy facilities are as follows:
As at Dec. 31
2022
2021
Minimum
lease
receipts
Present value of
minimum lease
receipts
Minimum
lease
receipts
Present value of
minimum lease
receipts
Within one year
Second to fifth years inclusive
More than five years
Less: unearned finance lease income
Total finance lease receivables
Included in the Consolidated Statements of Financial Position as:
Current portion of finance lease receivables (Note 13)
Long-term portion of finance lease receivables
Total finance lease receivables
18. Assets Held for Sale
The change in assets held for sale is as follows:
Balance, Jan 1
Transfers from property, plant and equipment
Disposals
Balance, Dec. 31
62
81
60
203
22
181
52
129
181
54
105
66
225
—
225
55
75
51
181
—
181
58
127
80
265
40
225
40
185
225
2022
25
28
(31)
22
2021
105
25
(105)
25
Sale of Pioneer Pipeline
On Oct. 1, 2020, the Company announced that it had entered into a definitive Purchase and Sale Agreement
providing for the sale of its 50 per cent interest in the Pioneer Pipeline to ATCO Gas and Pipelines Ltd.
("ATCO"). At Jan. 1, 2021, the assets held for sale included our interest in the Pioneer Pipeline and certain
mining assets.
On June 30, 2021, the Company closed the sale of the Pioneer Pipeline to ATCO for the aggregate sale price
of $255 million. The net cash proceeds to the Company from the sale of its 50 per cent interest, were
approximately $128 million and the Company recognized a gain on sale of $31 million on the Consolidated
Statements of Earnings (Loss). In addition, as part of the transaction, the natural gas transportation
agreement with the Pioneer Pipeline Limited Partnership was terminated which resulted in a gain of $2 million.
Other Held for Sale Assets
In December 2021, the Company transferred certain gas generation assets of $25 million to assets held for
sale. On Nov. 7, 2022, the Company closed the sale of the gas generation assets, received net cash proceeds
of $45 million and recognized a gain on sale of $20 million on the Consolidated Statements of Earnings
(Loss).
In 2022, the Company transferred two Hydro assets to assets held for sale upon entering into a purchase and
sale agreement. On Dec. 2, 2022, the Company closed the sale of these assets for the aggregate sale price
and net cash proceeds of $6 million and recognized a gain on sale of $2 million on the Consolidated
Statements of Earnings (Loss).
During 2022, the Company transferred $22 million to assets held for sale for cogeneration equipment.
During the fourth quarter of 2022, the Company recorded a contract settlement that was included in gain on
sale of assets and other on the Consolidated Statements of Earnings (Loss).
TransAlta Corporation • 2022 Integrated Report
F64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. Property, Plant and Equipment
A reconciliation of the changes in the carrying amount of PP&E is as follows:
Assets under
construction
Land Hydro(1)
Wind and
Solar(1)
Gas
generation
Energy
Transition
Capital spares
and other(2)
Total
495
96
846
2,746
3,935
4,901
Cost
As at Dec. 31, 2020
Additions(3)
Additions from development projects
Acquisitions (Note 4)
Disposals
Impairment charges (Note 7)(4)
Revisions/additions to decommissioning and
restoration costs (Note 24)
Retirement of assets
Change in foreign exchange rates
Transfers (to) from assets held for sale
(Note 18)
Transfers in (out) of PP&E(5)
Transfer of assets upon commissioning
As at Dec. 31, 2021
Additions (3)
Additions from development projects
Disposals
477
—
1
—
—
—
(2)
(1)
—
—
—
—
—
—
146
—
(91) —
(3)
(12)
—
—
1
128
(4)
(11)
—
—
—
—
(25) —
5
—
(676)
184
1
96
891
17
—
—
—
(3)
—
—
—
27
867
—
—
—
3
—
(4)
—
—
—
280
3,276
237
4,087
Impairment (charges) reversals (Note 7)(4)
2
—
(21)
(43)
Revisions/additions to decommissioning
and restoration costs (Note 24)
Retirement of assets
Change in foreign exchange rates
Transfers to assets held for sale (Note 18)
Transfers in (out) of PPE(5)
Transfer of assets upon commissioning
As at Dec. 31, 2022
Accumulated depreciation
As at Dec. 31, 2020
Depreciation
Retirement of assets
Disposals
Change in foreign exchange rates
Transfers to assets held for sale (Note 18)
Transfers from right-of-use assets
As at Dec. 31, 2021
Depreciation
Retirement of assets
Disposals
Change in foreign exchange rates
Transfers to assets held for sale (Note 18)
Transfers in (out) of PP&E(5)
As at Dec. 31, 2022
Carrying amount
As at Dec. 31, 2020
As at Dec. 31, 2021
As at Dec. 31, 2022
—
—
—
—
13
—
(22) —
16
—
(15)
(9)
—
(9)
—
(59)
(9)
45
—
(22)
(138) —
93
963
27
840
45
3,233
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
495
184
963
96
96
93
447
24
969
130
(3)
(6)
—
—
—
—
468
21
—
—
—
—
1,093
130
(8)
(6)
—
—
(3)
—
478
399
399
362
—
11
—
—
1,228
1,777
2,183
2,005
—
—
—
(2)
(2)
6
(57)
(25)
—
(5)
—
—
(1)
—
(12)
(12)
(4)
—
437
35
4,530
2,058
184
(55)
(1)
(8)
—
—
2,178
308
(10)
(1)
2
—
335
2,812
1,877
1,909
1,718
—
—
—
(74)
(468)
—
(49)
2
31
46
124
4,513
—
—
(216)
—
10
(7)
97
—
379
13,398
2
479
—
—
—
1
146
(79)
(13)
(589)
—
—
135
(121)
(7)
(27)
—
—
6
42
5
366
(2)
13,389
897
29
(220)
6
12
—
—
2
(2)
2
—
(62)
(74)
(39)
153
(31)
(442)
(13)
(24)
19
3,974
3,933
264
(48)
(72)
2
31
40
4,150
63
(7)
(211)
89
—
(340)
3,744
968
363
230
6
379
(6)
14,012
169
7,576
12
—
—
614
(112)
(73)
(1)
(7)
—
—
31
40
180
8,069
16
538
(2)
(33)
—
—
—
—
(212)
102
(3)
(5)
194
8,456
210
5,822
186
5,320
185
5,556
(1) The renewable generation that was previously disclosed has been separated by segment.
(2) Includes major spare parts and stand-by equipment available, but not in service, and spare parts used for routine, preventive or planned
maintenance.
(3) In 2022, the Company capitalized $16 million (2021 – $14 million) of interest to PP&E in at a weighted average rate of 6.0 per cent (2021 –
6.0 per cent).
(4) The 2021 impairment charges, net of reversals exclude the changes in decommissioning and restoration provisions on assets.
(5) Includes transfers between PP&E classifications, net of accumulated depreciation.
TransAlta Corporation • 2022 Integrated Report
F65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Assets under Construction
The Company commenced construction on the Horizon Hill wind project and White Rock wind projects in
2022. The Company also began its rehabilitation plan of the Kent Hills wind facilities during the second
quarter of 2022 and capitalized additions of $77 million in 2022. Initial construction activities on the Garden
Plain wind project started in the third quarter of 2021 and the Northern Goldfields Solar project in the fourth
quarter of 2021, with construction activities continuing throughout 2022 for both projects.
Change in Estimate - Useful Lives
During 2022, the Company adjusted the useful lives of certain assets included in the Gas segment to reflect
changes made based on the future operating expectations of the assets. This resulted in an increase of
$132 million in depreciation expense that was recognized in the Consolidated Statement of Earnings (Loss) in
2022.
20. Right-of-Use Assets
The Company leases various properties and types of equipment. Lease contracts are typically made for fixed
periods. Leases are negotiated on an individual basis and contain a wide range of terms and conditions. The
lease agreements do not impose covenants, but leased assets may not be used as security for borrowing
purposes.
A reconciliation of the changes in the carrying amount of the right-of-use assets is as follows:
As at Dec. 31, 2020
Additions
Acquisitions (Note 4)
Depreciation
Disposal of assets
Transfers
As at Dec. 31, 2021
Additions
Depreciation
Change in foreign exchange
rates
As at Dec. 31, 2022
Land
Buildings
Vehicles
Equipment
Pipeline
Total
58
—
13
(3)
—
—
68
36
(4)
2
102
24
1
—
(5)
—
—
20
—
(5)
—
15
1
—
—
—
—
—
1
1
—
—
2
16
—
—
(2)
—
(8)
6
3
(2)
—
7
42
—
—
(1)
(41)
—
—
—
—
—
—
141
1
13
(11)
(41)
(8)
95
40
(11)
2
126
During 2022, the Company recognized additions of $36 million mainly related to land leases for the Horizon
Hill and White Rock wind projects.
On June 30, 2021, the Company closed the sale of the Pioneer Pipeline to ATCO. As part of the transaction,
the natural gas transportation agreement with the Pioneer Pipeline Limited Partnership was terminated, which
resulted in the derecognition of the right-of-use asset of $41 million and lease liability of $43 million related to
the pipeline, resulting in a gain of $2 million.
For the year ended Dec. 31, 2022, TransAlta paid $16 million (2021 – $15 million) related to recognized lease
liabilities, consisting of $9 million (2021 – $8 million) of principal repayments and $7 million (2021 – $7 million)
of interest expense.
Short-term leases (term of less than 12 months) and leases with total lease payments below the Company's
capitalization threshold (low value leases) do not require recognition as lease liabilities and right-of-use
assets. For the year ended Dec. 31, 2022, the Company expensed $2 million (2021 and 2020 – nil) related to
short-term and low value leases.
TransAlta Corporation • 2022 Integrated Report
F66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Some of the Company's land leases that met the definition of a lease were not recognized as they require
variable payments based on production or revenue. Additionally, certain land leases require payments to be
made on the basis of the greater of the minimum fixed payments and variable payments based on production
or revenue. For these leases, lease liabilities have been recognized on the basis of the minimum fixed
payments. For the year ended Dec. 31, 2022, the Company expensed $8 million (2021 – $6 million and 2020 –
$7 million) in variable land lease payments for these leases.
21. Intangible Assets
A reconciliation of the changes in the carrying amount of intangible assets is as follows:
Power
sale
contracts
Software
and other
Intangibles
under
development
Coal rights
Total
Cost
As at Dec. 31, 2020
Additions
Impairment charges (Note 7)
Change in foreign exchange rates
Transfers
As at Dec. 31, 2021
Additions(1)
Change in foreign exchange rates
Transfers
As at Dec. 31, 2022
Accumulated amortization
As at Dec. 31, 2020
Amortization
As at Dec. 31, 2021
Amortization
Change in foreign exchange rates
As at Dec. 31, 2022
Carrying amount
As at Dec. 31, 2020
As at Dec. 31, 2021
As at Dec. 31, 2022
269
412
—
—
—
—
—
—
(2)
12
269
422
—
3
—
—
3
12
272
437
123
17
140
17
1
158
146
129
114
272
27
299
26
1
326
140
123
111
3
9
—
—
(8)
4
31
1
(9)
27
—
—
—
—
—
—
3
4
27
149
833
—
(17)
—
—
132
—
—
—
9
(17)
(2)
4
827
31
7
3
132
868
125
7
132
—
—
132
24
—
—
520
51
571
43
2
616
313
256
252
(1) In 2022, the Company reclassified $19 million in project development costs related to various US Wind projects to intangible assets. Refer
to Note 23 for further details. Other additions relate to corporate software costs.
TransAlta Corporation • 2022 Integrated Report
F67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. Goodwill
Goodwill acquired through business combinations has been allocated to groups of CGUs that are expected to
benefit from the synergies of the acquisitions. Goodwill by segments is as follows:
As at Dec. 31
Hydro
Wind and Solar
Energy Marketing
Total goodwill
2022
2021
258
176
30
464
258
175
30
463
For the purposes of the 2022 goodwill impairment review, the Company determined the recoverable amounts
of the Hydro, Wind and Solar and Energy Marketing segments by calculating the fair value less costs of
disposal using discounted cash flow projections based on the Company's long-range forecasts for the period
extending to the last planned asset retirement in 2072. The resulting fair value measurement is categorized
within Level III of the fair value hierarchy. No impairment of goodwill arose for any segment.
The key assumptions impacting the determination of fair value for the Hydro, Wind and Solar and Energy
Marketing segments are the following:
• Discount rates used for the goodwill impairment calculation in 2022 for the Hydro, Wind and Solar,
and Energy Marketing segments ranged from 5.9 per cent to 8.2 per cent (2021 – 5.0 per cent to 6.4
per cent).
•
•
Forecasts of electricity production for each facility are determined taking into consideration contracts
for the sale of electricity, historical production, regional supply-demand balances and capital
maintenance and expansion plans.
Forecasted sales prices for each facility are determined by taking into consideration contract prices
for facilities subject to long- or short-term contracts, forward price curves for merchant plants and
regional supply-demand balances. Where forward price curves are not available for the duration of
the facility’s useful life, prices are determined by extrapolation techniques using historical industry
and company-specific data. Merchant electricity prices used in these 2022 models ranged between
$28 to $233 per MWh during the forecast period (2021 – $17 to $136 per MWh).
TransAlta Corporation • 2022 Integrated Report
F68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Other Assets
The components of other assets are as follows:
As at Dec. 31
Loan receivable
South Hedland prepaid transmission access and distribution costs
Long-term prepaids and other assets
Project development costs
Total Other assets
Included in the Consolidated Statements of Financial Position as:
Total current other assets (Note 13)
Total long-term other assets
Total Other assets
2022
2021
37
61
56
10
164
4
160
164
55
65
48
29
197
55
142
197
The loan receivable of $37 million (2021 – $55 million) is an unsecured loan related to an advancement by the
Company's subsidiary, Kent Hills Wind LP, of the net financing proceeds of the Kent Hills Wind Bond ("KH
Bonds"), to its 17 per cent partner. On June 1, 2022, the loan receivable agreement was amended and its
original maturity date of Oct. 2, 2022, was extended to October 2027, resulting in the classification of a
portion of the loan receivable to non-current assets. The remaining terms of the original loan are unchanged
and it continues to bear interest at 4.55 per cent, with interest payable quarterly. No scheduled principal
repayments are required until maturity. However, repayments may be required for amounts associated with
foundation replacement capital expenditures and for operating account funding, as outlined in the
amendment made to the KH Bonds. During 2022, the Company received repayments of $18 million that were
required as part of the waiver and amendment made to the KH Bonds.
South Hedland prepaid transmission access and distribution costs are costs that are amortized on a straight-
line basis over the South Hedland PPA contract life.
Long-term prepaids and other assets include the funded portion of the TransAlta Energy Transition Bill
commitments discussed in Note 37 (G), costs related to transmission infrastructure and other contractually
required prepayments and deposits. During 2022, $16 million of costs related to transmission infrastructure
at the Windrise wind facility were reclassified from PP&E to other assets (long-term prepaids and other
assets) and will be amortized to net earnings (loss) over the useful life of the Windrise wind facility.
Project development costs primarily include the pre-construction project costs for projects. The change in
project development costs is as follows:
As at Dec. 31
Balance, Jan 1
Additions
Transfers to PP&E (Note 19)
Transfers to intangible assets (Note 21)
Impairment charges (Note 7)
Balance, Dec. 31
2022
2021
29
29
(29)
(19)
—
10
25
15
(1)
—
(10)
29
TransAlta Corporation • 2022 Integrated Report
F69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Decommissioning and Other Provisions
The change in decommissioning and other provision balances is as follows:
Decommissioning and
restoration
Other provisions
Total
Balance, Dec. 31, 2020
Liabilities incurred
Liabilities settled
Accretion
Acquisition of liabilities
Revisions in estimated cash flows
Revisions in discount rates
Reversals
Balance, Dec. 31, 2021
Liabilities incurred
Liabilities settled
Accretion (Note 10)
Disposals
Revisions in estimated cash flows
Revisions in discount rates
Reversals
Change in foreign exchange rates
Balance, Dec. 31, 2022
Included in the Consolidated Statements of Financial Position as:
As at Dec. 31,
Current portion
Non-current portion
Total Decommissioning and other provisions
A. Decommissioning and Restoration
608
8
(18)
32
2
167
(6)
—
793
1
(35)
49
(5)
95
(225)
—
15
688
65
22
(62)
—
—
12
—
(3)
34
23
(12)
—
—
5
—
(9)
—
41
2022
70
659
729
673
30
(80)
32
2
179
(6)
(3)
827
24
(47)
49
(5)
100
(225)
(9)
15
729
2021
48
779
827
A provision has been recognized for all generating facilities and mines for which TransAlta is legally, or
constructively, required to remove the facilities at the end of their useful lives and restore the sites to their
original condition. TransAlta estimates that the undiscounted amount of cash flow required to settle these
obligations is approximately $1.6 billion, which will be incurred between 2023 and 2072. The majority of the
costs will be incurred between 2023 and 2050.
During 2022, the Company accelerated the expected timing on decommissioning and restoration for certain
facilities. This increased the decommissioning and restoration provision by $95 million, of which $46 million
increased operating assets in PP&E and $49 million was recognized as an impairment charge in net earnings
related to retired assets.
In 2021, the Company increased the decommissioning and restoration provision by $167 million related to an
engineering study on the decommissioning costs of the wind sites of $120 million and the Sundance and
Keephills Units change in useful lives of $47 million. Of the total increase in decommissioning and restoration
provisions,$133 million increased operating assets in PP&E and $34 million was recognized as an impairment
charge in net earnings related to retired assets.
During 2022, the decommissioning and restoration provision decreased by $225 million (2021 – $6 million)
due to a significant increase in discount rates, largely driven by increases in market benchmark rates. On
average, discount rates increased with rates ranging from 7.0 to 9.7 per cent as at Dec. 31, 2022 (2021 – 3.6
to 6.5 per cent). This has resulted in a corresponding decrease in PP&E of $123 million (2021 – $6 million) on
operating assets and recognition of a $102 million (2021 – nil) impairment reversal in net earnings related to
retired assets.
TransAlta Corporation • 2022 Integrated Report
F70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At Dec. 31, 2022, the Company has provided a surety bond in the amount of US$147 million (2021 – US$147
million) in support of future decommissioning obligations at the Centralia coal mine. At Dec. 31, 2022, the
Company had provided a surety bond and letters of credit in the amount of $187 million (2021 – $188 million)
in support of future decommissioning obligations at the Highvale mine.
B. Other Provisions
Other provisions include provisions arising from ongoing business activities, amounts related to commercial
disputes between the Company and customers or suppliers and onerous contract provisions. Information
about the expected timing of settlement and uncertainties that could impact the amount or timing of
settlement has not been provided as this may impact the Company’s ability to settle the provisions in the
most favourable manner.
The onerous contract provisions occurred as a result of decisions to no longer operate on coal in Canada.
Future royalty payments related to the extraction of coal at the Highvale mine will occur until 2023 under the
royalty contract. Payments related to coal contracts for Sheerness are required until 2025. At Dec. 31, 2022,
the remaining balance of the provision for the onerous royalty contract was $7 million and the remaining
balance of the onerous coal contract was $10 million.
TransAlta Corporation • 2022 Integrated Report
F71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Credit Facilities, Long-Term Debt and Lease Liabilities
A. Amounts Outstanding
The amounts outstanding are as follows:
As at Dec. 31
2022
2021
Segment Maturity Currency
Carrying
value
Face
value
Interest(1)
Carrying
value
Face
value
Interest
Credit facilities
Committed syndicated
bank facility(2)
Term Facility
Debentures
7.3% Medium term notes
6.9% Medium term notes
Senior notes(3)
7.8% Senior notes(4)
6.5% Senior notes
4.5% Senior notes
Non-recourse
Melancthon Wolfe Wind LP
bond
New Richmond Wind LP
bond
Kent Hills Wind LP bond
Windrise Wind LP bond
Pingston bond
TAPC Holdings LP bond
(Poplar Creek)
TEC Hedland PTY Ltd
bond(5)
TransAlta OCP LP bond
Tax equity financing
Big Level & Antrim(6)
Lakeswind(7)
North Carolina Solar(8)
Other
Total long-term debt
Lease liabilities
Corporate
2026
CAD
32
33
4.7%
—
—
—%
Corporate
2024
CAD
396
400
6.5%
—
—
—%
Corporate
Corporate
Corporate
Corporate
Corporate
2029
2030
2029
2040
2022
CAD
CAD
USD
USD
USD
110
141
110
141
533
542
401
—
407
—
7.3%
6.9%
7.8%
6.5%
4.5%
110
141
110
141
7.3%
6.9%
—
—
378 383
510
511
—%
6.5%
4.5%
Wind & Solar
2028
CAD
202
203
3.8%
235 237
3.8%
Wind & Solar
2032
CAD
112
113
4.0%
120
121
4.0%
Wind & Solar
Wind & Solar
Hydro
Gas
Gas
Gas
Wind & Solar
Wind & Solar
Wind & Solar
Corporate
2033
2041
2023
2030
2042
2030
2029
2024
2028
2023
CAD
CAD
CAD
CAD
206
209
170
173
45
94
45
95
4.5%
3.4%
3.0%
8.9%
221
221
171
173
45
45
102
104
4.5%
3.4%
3.0%
4.4%
AUD
711
720
4.1%
732
742
4.1%
CAD
241
242
4.5%
263 265
4.5%
USD
USD
USD
CAD
102
108
15
6
1
15
6
1
6.6%
10.5%
7.3%
5.9%
106
112
6.6%
18
11
4
18
11
4
10.5%
7.3 %
5.9%
3,518
3,563
3,167 3,198
Total long-term debt and lease liabilities
Less: current portion of long-term debt
Less: current portion of lease liabilities
Total current long-term debt and lease liabilities
Total non-current credit facilities, long-term debt and lease
liabilities
135
3,653
(170)
(8)
(178)
3,475
100
3,267
(837)
(7)
(844)
2,423
(1) Interest rate reflects the stipulated rate or the average rate weighted by principal amounts outstanding and is before the effect of
hedging.
(2) Composed of bankers’ acceptances and other commercial borrowings under long-term committed credit facilities.
(3) US face value at Dec. 31, 2022 — US$700 million (2021 – US$700 million).
(4) The effective interest rate for the senior notes is 5.98 per cent after the effects of gains realized on settled interest rate hedging
instruments.
(5) AU face value at Dec. 31, 2022 — AU$786 million (2021 – AU$800 million).
(6) US face value at Dec. 31, 2022 — US$79 million (2021 – US$88 million).
(7) US face value at Dec. 31, 2022 — US$11 million (2021 – US$14 million).
(8) US face value at Dec. 31, 2022 — US$5 million (2021 – US$9 million).
TransAlta Corporation • 2022 Integrated Report
F72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company's credit facilities are summarized in the table below:
As at Dec. 31, 2022
Utilized
Credit Facilities
Committed
Facility
size
Outstanding
letters of
credit(1)
Cash
drawings
Available
capacity
Maturity
date
TransAlta Corporation syndicated credit facility
1,250
TransAlta Renewables syndicated credit facility
TransAlta Corporation bilateral credit facilities
TransAlta Corporation Term Facility
Total Committed
Non-Committed
TransAlta Corporation demand facilities
TransAlta Renewables demand facility
Total Non-Committed
700
240
400
2,590
250
150
400
738
—
219
—
957
120
98
218
—
33
—
400
433
—
—
—
512
667
21
—
1,200
130
52
182
Q2 2026
Q2 2026
Q2 2024
Q3 2024
n/a
n/a
(1) TransAlta has obligations to issue letters of credit and cash collateral to secure potential liabilities to certain parties, including those
related to potential environmental obligations, commodity risk management and hedging activities, pension plan obligations, construction
projects and purchase obligations. Letters of credit drawn against the non-committed facilities reduce the available capacity under the
committed syndicated credit facilities. At Dec. 31, 2022, TransAlta provided cash collateral of $304 million.
These facilities are the primary source for short-term liquidity after the cash flow generated from the
Company's business. The TransAlta Corporation committed syndicated credit facility was converted into a
Sustainability Linked Loan in 2021.
During 2022, the Company closed a two-year $400 million floating rate Term Facility with its banking
syndicate maturing on Sept. 7, 2024. In addition, the committed syndicated credit facilities were extended by
one year to June 30, 2026 and the committed bilateral credit facilities were extended by one year to June 30,
2024. Interest rates on the credit facilities and Term Facility vary depending on the option selected (Canadian
prime, bankers' acceptances, SOFR or US base rate, etc.) in accordance with a pricing grid that is standard
for such facilities.
The Company is in compliance with the terms of the credit facilities and all undrawn amounts are fully
available. In addition to the $1.0 billion available under the credit facilities, the Company also has $1.1 billion of
available cash and cash equivalents, net of bank overdraft, and $17 million ($17 million principal portion) in
cash restricted for repayment of the OCP bonds (refer to section E below).
TransAlta has letters of credit of $218 million issued from uncommitted demand facilities; these obligations
are backstopped and reduce the available capacity on the committed credit facilities.
Senior Notes
On Nov. 17, 2022, the Company issued US$400 million senior notes ("US$400 million Senior Green Bonds"),
which have a fixed coupon rate of 7.75 per cent per annum and matures on Nov. 15, 2029. Including the
effects of settled interest rate swaps, the notes have an effective yield of approximately 5.982 per cent. The
notes are unsecured and rank equally in right of payment with all of our existing and future senior
indebtedness and senior in right of payment to all of our future subordinated indebtedness. The interest
payments on the bonds are made semi-annually, on November 15 and May 15 with the first payment
commencing May 15, 2023. TransAlta will allocate an amount equal to the net proceeds from this offering to
finance or refinance, new and/or existing eligible green projects in accordance with its Green Bond
Framework ("the Framework"). The Framework received a second-party opinion from Sustainalytics, which
verified that it aligned with the Green Bond Principles from the International Capital Markets Association.
On Nov. 15, 2022, the Company repaid the US$400 million 4.50 per cent unsecured senior notes on its
maturity in addition to related fees and expenses.
A total of US$370 million (2021 – US$370 million) of the senior notes has been designated as a hedge of the
Company’s net investment in US operations.
TransAlta Corporation • 2022 Integrated Report
F73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Non-Recourse Debt
On Dec. 6, 2021, TransAlta completed a secured green bond by way of private placement for approximately
$173 million ("Windrise Wind LP Bond Offering"). Windrise Wind LP Bond Offering is secured by a first ranking
charge over all assets of the issuer, Windrise Wind LP and the bonds amortize and bear interest from their
date of issue at a rate of 3.41 per cent per annum and mature on Sept. 30, 2041. Payments on the bonds will
be interest-only to and including Dec. 31, 2022, with quarterly blended payments of principal and interest
commencing on March 31, 2023. TransAlta used the proceeds of the Windrise Wind LP Bond Offering to
finance or refinance eligible green projects, including renewable energy facilities and to fund a construction
reserve account.
Tax Equity
Tax equity financings are typically represented by the initial equity investments made by the project investors
at each project (net of financing costs incurred), except for the Lakeswind and North Carolina Solar acquired
tax equity financings, which were initially recognized at their fair values. Tax equity financing balances are
reduced by the value of tax benefits (production tax credits, tax depreciation and investment tax credits)
allocated to the investor and by cash distributions paid to the investor for their share of net earnings and cash
flow generated at each project. Tax equity financing balances are increased by interest recognized at the
implicit interest rate. The maturity dates of each financing are subject to change and are primarily dependent
upon when the project investor achieves the agreed upon targeted rate of return. The Company anticipates
the maturity dates of the tax equity financings will be: Big Level and Antrim in December 2029; Lakeswind in
March 2024 and North Carolina Solar in December 2028.
Other
Other debt consists of an unsecured commercial loan obligation that bears interest at 5.9 per cent and
matures in 2023, requiring annual payments of interest and principal.
TransAlta’s debt has terms and conditions, including financial covenants, that are considered normal and
customary. As at Dec. 31, 2022, the Company was in compliance with all debt covenants.
B. Restrictions Related to Non-Recourse Debt and Other Debt
The Melancthon Wolfe Wind LP, Pingston Power Inc., TAPC Holdings LP, New Richmond Wind LP, Kent Hills
Wind LP, TEC Hedland Pty Ltd notes, Windrise Wind LP and TransAlta OCP LP non-recourse bonds with a
carrying value of $1.8 billion as at Dec. 31, 2022 (2021 – $1.9 billion) are subject to customary financing
conditions and covenants that may restrict the Company’s ability to access funds generated by the facilities’
operations. Upon meeting certain distribution tests, typically performed once per quarter, the funds are able
to be distributed by the subsidiary entities to their respective parent entity. These conditions include meeting
a debt service coverage ratio prior to distribution, which was met by these entities in the fourth quarter of
2022 with the exception of Kent Hills Wind LP, as discussed below and TAPC Holdings LP, which has been
impacted by higher interest rates in 2022. The funds in these entities that have accumulated since the fourth
quarter test will remain there until the next debt service coverage ratio can be calculated in the first quarter of
2023. At Dec. 31, 2022, $50 million (2021 – $67 million) of cash was subject to these financial restrictions.
Proceeds received from the TEC Hedland Pty Ltd notes in the amount of $8 million (AU$9 million) are not able
to be accessed by other corporate entities as the funds must be solely used by the project entities for the
purpose of paying major maintenance costs.
Additionally, certain non-recourse bonds require that certain reserve accounts be established and funded
through cash held on deposit and/or by providing letters of credit.
Kent Hills Wind Bonds
In the fourth quarter of 2021, the Company disclosed that events of default may have occurred under the
trust indenture governing the terms of the KH Bonds. Accordingly, the Company classified the entire carrying
value of the bonds as current as at Dec. 31, 2021.
During the second quarter of 2022, the Company obtained a waiver and entered into a supplemental
indenture that facilitated the rehabilitation of the Kent Hills 1 and 2 wind facilities. Upon receipt of the waiver,
the Company reclassified a portion of the carrying value outstanding for the KH Bonds to non-current
liabilities with the exception of the scheduled principal repayments due within the next 12 months. In
accordance with the supplemental indenture, Kent Hills Wind LP cannot make any distributions to its partners
until the foundation replacement work has been completed.
TransAlta Corporation • 2022 Integrated Report
F74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A foundation replacement reserve account was set up in accordance with the supplemental indenture, with
funds in the account being used to pay foundation replacement costs. The account is funded quarterly with
the last funding requirement on April 1, 2023. The balance in the account is $65 million as at Dec. 31, 2022 (nil
– Dec. 31, 2021).
C. Security
Non-recourse debts totalling $1.4 billion as at Dec. 31, 2022 (2021 – $1.5 billion) are each secured by a first
ranking charge over all of the respective assets of the Company’s subsidiaries that issued the bonds, which
include PP&E with total carrying amounts of $1.5 billion at Dec. 31, 2022 (2021 – $1.5 billion) and intangible
assets with total carrying amounts of $70 million (2021 – $78 million). At Dec. 31, 2022, a non-recourse bond
of approximately $94 million (2021 – $103 million) was secured by a first ranking charge over the equity
interests of the issuer that issued the non-recourse bond.
The TransAlta OCP bonds have a carrying value of $241 million (2021 – $263 million) and are secured by the
assets of TransAlta OCP, including the right to annual capital contributions and OCA payments from the
Government of Alberta. Under the OCA, the Company receives annual cash payments on or before July 31 of
approximately $40 million (approximately $37 million, net to the Company), commencing on Jan. 1, 2017 and
terminating at the end of 2030.
D. Principal Repayments
2023
2024
2025
2026
2027
2028 and
thereafter
Total
Principal repayments(1)
Lease liabilities(2)
170
(7)
527
4
142
4
177
3
154
2,393
3,563
4
127
135
(1) Excludes impact of hedge accounting and derivatives.
(2) Lease liabilities include a lease incentive of $12 million, expected to be received in 2023.
E. Restricted Cash
The Company had $17 million (2021 – $17 million) of restricted cash related to the TransAlta OCP bonds,
which is required to be held in a debt service reserve account to fund scheduled future debt repayments.
The Company also had $53 million (2021 – $53 million) of restricted cash related to the TEC Hedland Pty Ltd
bond; reserves are required to be held under commercial arrangements and for debt service. Cash reserves
may be replaced by letters of credit in the future.
F. Letters of Credit
Letters of credit issued by TransAlta are drawn on its $1.3 billion committed syndicated credit facility, its
$240 million bilateral committed credit facilities and its $250 million uncommitted demand facilities. TransAlta
has drawn $738 million on its committed syndicated credit facility, $219 million on its bilateral committed
credit facilities and $120 million on its uncommitted demand facilities.
Letters of credit issued by TransAlta Renewables are drawn on its $700 million committed syndicated credit
facility and its $150 million uncommitted demand facility. TransAlta Renewables has drawn letters of credit of
$98 million on its uncommitted demand facility.
Letters of credit are issued to counterparties under various contractual arrangements with the Company and
certain subsidiaries of the Company. If the Company or its subsidiary does not perform under such contracts,
the counterparty may present its claim for payment to the financial institution through which the letter of
credit was issued. Any amounts owed by the Company or its subsidiaries under these contracts are reflected
in the Consolidated Statements of Financial Position. All letters of credit expire within one year and are
expected to be renewed, as needed, in the normal course of business. The total outstanding letters of credit
as at Dec. 31, 2022, was $1,175 million (2021 – $902 million) with no (2021 – nil) amounts exercised by third
parties under these arrangements.
TransAlta Corporation • 2022 Integrated Report
F75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
G. Currency Impacts
The strengthening of the US dollar has increased the US-denominated long-term debt balances, mainly the
senior notes and tax equity financing, by $41 million as at Dec. 31, 2022 (2021 – $1 million). Almost all of the
US-denominated debt is hedged either through financial contracts or net investments in the US operations.
Additionally, the weakening of the Australian dollar has decreased the Australian-denominated non-recourse
senior secured notes balance by approximately $9 million as at Dec. 31, 2022 (2021 – $40 million). As this
debt is issued by an Australian subsidiary, the foreign currency translation impacts are recognized within
other comprehensive income (loss).
26. Exchangeable Securities
On March 22, 2019, the Company entered into an Investment Agreement whereby Brookfield Renewable
Partners or its affiliates (collectively "Brookfield") agreed to invest $750 million in TransAlta through the
purchase of exchangeable securities, which are exchangeable into an equity ownership interest in TransAlta’s
Alberta Hydro Assets in the future at a value based on a multiple of the Alberta Hydro Assets’ future-adjusted
EBITDA ("Option to Exchange").
A. $750 Million Exchangeable Securities
As at
Dec. 31, 2022
Dec. 31, 2021
Exchangeable debentures – due May 1, 2039(1)
Exchangeable preferred shares(2)
Total exchangeable securities
Carrying
value
Face
value
Interest
Carrying
value
339
400
739
350
400
750
7%
7%
335
400
735
Face
value
350
400
750
Interest
7%
7%
(1) On May 1, 2019, Brookfield invested the initial tranche of $350 million in exchange for seven per cent unsecured subordinated
debentures due May 1, 2039.
(2) On Oct. 30, 2020, Brookfield invested the second tranche of $400 million in exchange for redeemable, retractable first preferred shares
(Series 1). Exchangeable preferred share dividends are reported as interest expense.
On Dec. 12, 2022, the Company declared a dividend of $7 million in aggregate for Exchangeable Preferred
Shares at the fixed rate of 1.764 per cent, per share, payable on Feb. 28, 2023. The Exchangeable Preferred
Shares are considered debt for accounting purposes and as such, dividends are reported as interest expense
(Note 10).
B. Option to Exchange
As at
Description
Dec. 31, 2022
Dec. 31, 2021
Base fair value
Sensitivity Base fair value
Sensitivity
Option to exchange – embedded derivative
—
+nil
-25
—
+nil
-32
The Investment Agreement allows Brookfield the option to exchange all of the outstanding exchangeable
securities after Dec. 31, 2024, into an equity ownership interest of up to a maximum 49 per cent in an entity
that has been formed to hold TransAlta’s Alberta Hydro Assets. The fair value of the option to exchange is
considered a Level III fair value measurement as there is no available market-observable data. It is therefore
valued using a mark-to-forecast model with inputs that are based on historical data and changes in
underlying discount rates only when it represents a long-term change in the value of the option to exchange.
Sensitivity ranges for the base fair value are determined using reasonably possible alternative assumptions
for key unobservable inputs, which is mainly the change in the implied discount rate of the future cash flow.
The sensitivity analysis has been prepared using the Company’s assessment that a change in the implied
discount rate of the future cash flow of 1 per cent is a reasonably possible change.
TransAlta Corporation • 2022 Integrated Report
F76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The maximum equity interest Brookfield can own with respect to the Hydro Assets is 49 per cent. If
Brookfield’s ownership interest is less than 49 per cent at conversion, Brookfield has a one-time option
payable in cash to increase its ownership to up to 49 per cent, exercisable up until Dec. 31, 2028, and
provided Brookfield holds at least 8.5 per cent of TransAlta’s common shares. Under this top-up option,
Brookfield will be able to acquire an additional 10 per cent interest in the entity holding the Hydro Assets,
provided the 20-day volume-weighted average price (“VWAP”) of TransAlta’s common shares is not less than
$14 per share prior to the exercise of the option and up to the full 49 per cent if the 20-day VWAP of
TransAlta’s common shares at that time is not less than $17 per share. To the extent the value of the
investment would exceed a 49 per cent equity interest, Brookfield will be entitled to receive the balance of
the redemption price in cash.
Under the terms of the Investment Agreement, Brookfield committed to purchase TransAlta common shares
on the open market to increase its share ownership in TransAlta to not less than nine per cent by May 1, 2021.
As of Dec. 31, 2022, Brookfield, through its affiliates, held, owned or had control over an aggregate of
35,456,023 common shares, representing approximately 13.2 per cent of the issued and outstanding
common shares, calculated on an undiluted basis. In connection with the Investment Agreement, Brookfield is
entitled to nominate two directors for election to the Board.
27. Defined Benefit Obligation and Other Long-Term Liabilities
The components of defined benefit obligation and other long-term liabilities are as follows:
As at Dec. 31
Defined benefit obligation (Note 32)
Long-term incentive accruals (Note 31)
Retail power contract liability
Other
Total
2022
150
8
126
10
294
2021
228
4
—
21
253
The liability for pension and post-employment benefits and associated costs included in compensation
expenses are impacted by estimates related to changes in key actuarial assumptions, including discount
rates. The defined benefit obligation has decreased by $78 million to $150 million as at Dec. 31, 2022, from
$228 million as at Dec. 31, 2021. The decrease is primarily driven by increases in discount rates in 2022,
largely driven by increases in market benchmark rates and the voluntary contribution of $35 million made to
the Sunhills Mining Ltd. Pension Plan, partially offset by a decrease in plan assets due to poor market returns.
The Company made a voluntary contribution of $35 million during 2022 to further improve the funded status
of the Sunhills Mining Ltd. Pension Plan for the Highvale mine and to support the employees affected by the
closure of the Highvale mine in 2021 and our transition off-coal to cleaner sources. The contribution reduces
the amount of the Company's future funding obligations, including amounts secured by the letters of credit.
A 1 per cent increase in discount rates would result in a $39 million decrease in the defined benefit obligation.
Refer to Note 32 for additional sensitivities impacting the defined benefit obligation.
On Dec. 1, 2022, the Company closed a purchase and sale agreement for customer retail contracts to deliver
power and gas, along with power and gas financial swaps. The Company concluded this will be accounted for
as an asset acquisition and allocated values to risk management assets of $139 million (level II valuation) and
retail power contract liabilities of $129 million within the Gas segment. The retail power contract liabilities
acquired represent certain off-market retail power customer contracts for which fair value was determined as
the present value of the amount by which contract terms deviated from the terms that a market participant
could have achieved at the closing date. The retail contract liability is amortized to other operating income
over the remaining term of the contracts based on volumes that will be delivered each month.
TransAlta Corporation • 2022 Integrated Report
F77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. Common Shares
A. Issued and Outstanding
TransAlta is authorized to issue an unlimited number of voting common shares without nominal or par value.
As at Dec. 31
2022
2021
Common
shares
(millions)
Amount
Common
shares
(millions)
Amount
Issued and outstanding, beginning of year
271.0
2,901
269.8
2,896
Purchased and cancelled under the NCIB
Effects of share-based payment plans
Stock options exercised
(4.3)
(46)
0.9
0.5
5
3
—
—
1.2
—
(3)
8
Issued and outstanding, end of year
268.1
2,863
271.0
2,901
B. Normal Course Issuer Bid ("NCIB") Program
Shares purchased by the Company under the NCIB are recognized as a reduction to share capital equal to the
average carrying value of the common shares. Any difference between the aggregate purchase price and the
average carrying value of the common shares is recorded in deficit.
The following are the effects of the Company's purchase and cancellation of the common shares during the
year:
For the year ended Dec. 31
Total shares purchased(1)
Average purchase price per share
Total cost (millions)
Weighted average book value of shares cancelled
Amount recorded in deficit
2022
2021
4,342,300
12.48
54
46
(8)
—
—
—
—
—
(1) As at Dec. 31, 2022, includes 164,300 (2021 – nil) shares that were repurchased but were not cancelled due to timing differences
between the transaction date and settlement date. The Company paid $52 million in 2022 and the remaining amount was paid subsequent to
the year end.
2022
On May 24, 2022, the Toronto Stock Exchange (“TSX”) accepted the notice filed by the Company to renew its
normal course issuer bid for a portion of its common shares. Pursuant to the NCIB, TransAlta may repurchase
up to a maximum of 14 million common shares, representing approximately 7.16 per cent of its public float of
common shares as at May 17, 2022. Any common shares purchased under the NCIB are cancelled. The period
during which TransAlta is authorized to make purchases under the NCIB commenced on May 31, 2022, and
ends on May 30, 2023.
2021
On May 25, 2021, the Company announced that the TSX accepted the notice filed by the Company to
implement an NCIB for a portion of its common shares. Pursuant to the NCIB, TransAlta may repurchase up to
a maximum of 14 million common shares, representing approximately 7.16 per cent of its public float of
common shares as at May 18, 2021. No common shares were repurchased in 2021 under the current and
previous NCIB.
TransAlta Corporation • 2022 Integrated Report
F78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
C. Shareholder Rights Plan
The Company initially adopted the Shareholder Rights Plan in 1992, which was amended and restated on April
28, 2022. As required, the Shareholder Rights Plan must be put before the Company’s shareholders every
three years for approval. It was last approved on April 28, 2022, and will need to be approved at the annual
meeting of shareholders in 2025. The primary objective of the Shareholder Rights Plan is to encourage a
potential acquirer to meet certain minimum standards designed to promote the fair and equal treatment of all
common shareholders. When an acquiring shareholder acquires 20 per cent or more of the Company’s
common shares, except in limited circumstances including by way of a “permitted bid” or a "competing
permitted bid" (as defined in the Shareholder Rights Plan), the rights granted under the Shareholder Rights
Plan become exercisable by all shareholders except those held by the acquiring shareholder. Each right will
entitle a shareholder, other than the acquiring shareholder, to purchase additional common shares at a
significant discount to market, thus exposing the person acquiring 20 per cent or more of the shares to
substantial dilution of their holdings.
D. Earnings per Share
Year ended Dec. 31
Net earnings (loss) attributable to common shareholders
Basic and diluted weighted average number of common shares outstanding
(millions)
Net earnings (loss) per share attributable to common shareholders,
basic and diluted
E. Dividends
2022
2021
2020
4
(576)
(336)
271
271
275
0.01
(2.13)
(1.22)
On Dec. 12, 2022, the Company declared a quarterly dividend of $0.055 per common share, payable on
April 1, 2023.
There have been no other transactions involving common shares between the reporting date and the date of
completion of these consolidated financial statements.
29. Preferred Shares
A. Issued and Outstanding
All preferred shares issued and outstanding are non-voting cumulative redeemable fixed or floating rate first
preferred shares.
As at Dec. 31
2022
2021
Series(1)
Series A
Series B
Series C
Series D
Series E
Series G
Number of
shares
(millions)
Number of
shares
(millions)
Amount
Amount
9.6
2.4
10.0
1.0
9.0
6.6
38.6
235
58
243
26
219
161
942
9.6
2.4
11.0
—
9.0
6.6
38.6
235
58
269
—
219
161
942
Issued and outstanding, end of year
(1) Series 1 Preferred Shares are accounted for as long-term debt. Refer to Note 26.
I. Series A Cumulative Fixed Redeemable Rate Reset Preferred Shares Conversion
On March 31, 2021, the Company converted 1,417,338 of its 10.2 million Series A Cumulative Fixed
Redeemable Rate Reset Preferred Shares ("Series A Shares") and 871,871 of its 1.8 million Series B
Cumulative Redeemable Floating Rate Preferred Shares ("Series B Shares"), on a one-for-one basis, into
Series B Shares and Series A Shares.
TransAlta Corporation • 2022 Integrated Report
F79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
II. Series C Cumulative Redeemable Rate Reset Preferred Shares Conversion
On June 30, 2022, the Company converted 1,044,299 of its 11.0 million Cumulative Redeemable Rate Reset
First Preferred Shares, Series C (“Series C Shares”), on a one-for-one basis, into Cumulative Redeemable
Floating Rate First Preferred Shares, Series D (“Series D Shares”).
The Series C Shares will pay fixed cumulative preferential cash dividends on a quarterly basis, for the five-
year period from and including June 30, 2022, to but excluding June 30, 2027, if, as and when declared by
the Board. The annual fixed dividend rate of 5.854 per cent, being equal to the five-year Government of
Canada bond yield of 2.754 per cent determined as of May 31, 2022, plus 3.10 per cent, in accordance with
the terms of the Series C Shares.
The Series D Shares will pay quarterly floating rate cumulative preferential cash dividends for the five-year
period from and including June 30, 2022, to but excluding June 30, 2027, if, as and when declared by the
Board. The quarterly dividend rate for the Series D Shares will be established each quarter, being equal to the
annual rate for the auction of 90-day Government of Canada Treasury Bills, plus 3.10 per cent, in accordance
with the terms of the Series D Shares.
III. Series E Cumulative Fixed Redeemable Rate Reset Preferred Shares Conversion
On Sept. 21, 2022, the Company announced that, after taking into account all election notices received for the
conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series E (the "Series E shares") into
Cumulative Redeemable Floating Rate Preferred Shares Series F (the "Series F Shares"), there were 89,945
Series E Shares tendered for conversion, which was less than the one million shares required to give effect to
conversions into Series F Shares. Therefore, none of the Series E Shares were converted into Series F Shares.
As a result, the Series E Shares will be entitled to receive quarterly fixed cumulative preferential cash
dividends, if, as and when declared by the Board. The annual dividend rate for the Series E Shares for the
five-year period from and including Sept. 30, 2022, to but excluding Sept. 30, 2027, will be 6.894 per cent,
which is equal to the five-year Government of Canada bond yield of 3.244 per cent, determined as of Aug. 31,
2022, plus 3.65 per cent, in accordance with the terms of the Series E Shares.
Preferred Share Series Information
The holders are entitled to receive cumulative fixed quarterly cash dividends at specified rates, as approved
by the Board. After an initial period of approximately five years from issuance and every five years thereafter
(“Rate Reset Date”), the fixed rate resets to the sum of the then five-year Government of Canada bond yield
(the fixed rate “Benchmark”) plus a specified spread. Upon each Rate Reset Date, the shares are also:
•
Redeemable at the option of the Company, in whole or in part, for $25.00 per share, plus all declared
and unpaid dividends at the time of redemption.
• Convertible at the holder’s option into a specified series of non-voting cumulative redeemable
floating rate first preferred shares that pay cumulative floating rate quarterly cash dividends, as
approved by the Board, based on the sum of the then Government of Canada 90-day Treasury Bill
rate (the floating rate “Benchmark”) plus a specified spread. The cumulative floating rate first
preferred shares are also redeemable at the option of the Company and convertible back into each
original cumulative fixed rate first preferred share series, at each subsequent Rate Reset Date, on the
same terms as noted above.
TransAlta Corporation • 2022 Integrated Report
F80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Characteristics specific to each first preferred share series as at Dec. 31, 2022, are as follows:
Series
Rate during term
Annual dividend
rate per share
($)(1)
Next
conversion
date
Rate spread
over benchmark
(per cent)
Convertible to
Series
A
B
C
D
E
F
G
H
Fixed
Floating
Fixed
Floating
Fixed
Floating
Fixed
Floating
0.71924
March 31, 2026
1.10295
March 31, 2026
1.34933
1.40030
Jun. 30, 2027
Jun. 30, 2027
1.51102
Sept. 30, 2027
—
—
1.24700
Sept. 30, 2024
—
—
2.03
2.03
3.10
3.10
3.65
3.65
3.80
3.80
B
A
D
C
F
E
H
G
(1) The annual dividend rate per share represents dividends declared in 2022.
B. Dividends
The following table summarizes the value of the preferred share dividends declared in 2022 and 2021:
Series
A
B(2)
C
D(3)
E
G
Total for the year
Total dividends
declared
2022(1)
2021(1)
7
3
14
1
13
8
46
7
1
11
—
12
8
39
(1) No dividends were declared in the first quarter of the year as the quarterly dividend related to the period covering the first quarter was
declared in December of the prior year.
(2) Series B Preferred Shares pay quarterly dividends at a floating rate based on the 90-day Government of Canada Treasury Bill rate, plus
2.0 per cent.
(3) Series D Preferred Shares pay quarterly dividends at a floating rate based on the 90-day Government of Canada Treasury Bill rate, plus
3.1 per cent.
On Dec. 12, 2022, the Company declared a quarterly dividend of $0.17981 per share on the Series A preferred
shares, $0.37991 per share on the Series B preferred shares, $0.36588 per share on the Series C preferred
shares, $0.45578 per share on the Series D preferred shares, $0.43088 per share on the Series E preferred
shares and $0.31175 per share on the Series G preferred shares, all payable on March 31, 2023.
TransAlta Corporation • 2022 Integrated Report
F81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. Accumulated Other Comprehensive Income (Loss)
The components of and changes in, accumulated other comprehensive income (loss) are as follows:
Currency translation adjustment
Opening balance, Jan. 1
Losses (gains) on translating net assets of foreign operations, net of reclassifications to net
earnings, net of tax
Gains (losses) on financial instruments designated as hedges of foreign operations, net of
reclassifications to net earnings, net of tax(1)
Balance, Dec. 31
Cash flow hedges
Opening balance, Jan. 1
Losses on derivatives designated as cash flow hedges, net of reclassifications to net earnings
and to non-financial assets, net of tax(2)
Balance, Dec. 31
Employee future benefits
Opening balance, Jan. 1
Net actuarial gains on defined benefit plans, net of tax(3)
Balance, Dec. 31
Other
Opening balance, Jan. 1
Intercompany and third-party investments at FVTOCI
Balance, Dec. 31
Accumulated other comprehensive income (loss)
2022
2021
(35)
21
(25)
(39)
(21)
(14)
—
(35)
228
436
(456)
(208)
(228)
228
(29)
37
8
(18)
55
37
(222)
(66)
37
(29)
(47)
29
(18)
146
(1) Net of income tax recovery of $3 million for the year ended Dec. 31, 2022 (2021 – nil).
(2) Net of income tax recovery of $112 million for the year ended Dec. 31, 2022 (2021 – $57 million).
(3) Net of income tax expense of $12 million for the year ended Dec. 31, 2022 (2021 – $11 million).
31. Share-Based Payment Plans
The Company has the following share-based payment plans:
A. Performance Share Unit (“PSU”) and Restricted Share Unit (“RSU”) Plan
Under the Share Unit Plan, grants of PSUs and RSUs may be made annually, but are measured and assessed
over a three-year performance period. Grants are determined as a percentage of participants’ base pay and
are converted to PSUs or RSUs on the basis of the Company’s common share price at the time of grant.
Vesting of PSUs is subject to achievement over a three-year period of specific performance measures that
are established at the time of each grant. RSUs are subject to a three-year cliff-vesting requirement. RSUs
and PSUs track the Company’s share price over the three-year period and accrue dividends as additional
units at the same rate as dividends paid on the Company’s common shares.
The pre-tax compensation expense related to PSUs and RSUs in 2022 was $20 million (2021 – $14 million,
2020 – $15 million), which is included in OM&A in the Consolidated Statements of Earnings (Loss).
B. Deferred Share Unit (“DSU”) Plan
Under the Share Unit Plan, members of the Board and executives may, at their option, purchase DSUs using
certain components of their fees or pay. A DSU is a notional share that has the same value as one common
share of the Company and fluctuates based on the changes in the value of the Company’s common shares in
the marketplace. DSUs accrue dividends as additional DSUs at the same rate as dividends are paid on the
Company’s common shares. DSUs are redeemable in cash and may not be redeemed until the termination or
retirement of the director or executive from the Company.
TransAlta Corporation • 2022 Integrated Report
F82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company accrues a liability and expense for the appreciation in the common share value in excess of the
DSU’s purchase price and for dividend equivalents earned. The pre-tax compensation expense related to the
DSU's was nil in 2022 (2021 – $3 million expense, 2020 – $1 million expense).
C. Stock Option Plan
In 2022, the Company granted executive officers of the Company a total of 0.3 million stock options with a
weighted average exercise price of $12.66 that vest over a three-year period and expire 7 years after
issuance (2021 – 0.7 million stock options at $9.86; 2020 – 0.7 million stock options at $9.17). The expense
recognized relating to these grants during 2022 was approximately $1 million (2021 – approximately $2
million, 2020 – approximately $2 million).
The total options outstanding and exercisable under the Stock Option Plan at Dec. 31, 2022, are outlined
below:
Options outstanding
Range of exercise prices(1)
($ per share)
Number of options
(millions)
Weighted average
remaining contractual life
(years)
Weighted average exercise price
($ per share)
5.00-12.00
3.0
3.89
8.41
(1) Options currently exercisable as at Dec. 31, 2022.
On May 24, 2021, the Company's shareholders approved amendments to the Stock Option Plan to reduce the
total aggregate number of common shares held in reserve for issuance under this program. The amendments
reduce the aggregate total number of shares reserved for issuance to 14.5 million common shares as at
March 31, 2021. The Company is authorized to grant options to purchase up to an aggregate of 14.5 million
common shares at prices based on the market price of the shares on the TSX as determined on the grant
date. The number of common shares that may be (i) issued to insiders within any one-year period, or (ii)
issuable to insiders at any time, in each case, under the Stock Option Plan alone or when combined with all
other security-based compensation arrangements (including the Share Unit Plan), shall not exceed 10 per
cent of the total number of common shares issued and outstanding from time to time. The Stock Option Plan
provides for grants of options to eligible employees, including executives, designated by the Human
Resources Committee from time to time.
32. Employee Future Benefits
A. Description
The Company sponsors registered pension plans in Canada and the US covering substantially all employees
of the Company in these countries and specific named employees working internationally. These plans have
defined benefit and defined contribution options and in Canada there is an additional non-registered
supplemental plan for eligible employees whose annual earnings exceed the Canadian income tax limit.
Except for the Highvale pension plan acquired in 2013, the Canadian and US defined benefit pension plans
are closed to new entrants. The US defined benefit pension plan was frozen effective Dec. 31, 2010, resulting
in no future benefits being earned. The supplemental pension plan was closed as of Dec. 31, 2015, and a new
defined contribution supplemental pension plan commenced for executive members effective Jan. 1, 2016.
Current executives as of Dec. 31, 2015, were grandfathered into the old supplemental plan.
The latest actuarial valuation for accounting purposes of the US pension plan was at Jan. 1, 2022. The latest
actuarial valuation for accounting purposes of the Highvale and Canadian pension plans was at Dec. 31, 2021.
The measurement date used for all plans to determine the fair value of plan assets and the present value of
the defined benefit obligation was Dec. 31, 2022.
Funding of the registered pension plans complies with applicable regulations that require actuarial valuations
of the pension funds at least once every three years in Canada, or more, depending on funding status and
every year in the US. The supplemental pension plan is solely the obligation of the Company. The Company is
not obligated to fund the supplemental plan but is obligated to pay benefits under the terms of the plan as
they come due. The Company posted a letter of credit in March 2022 in the amount of $96 million to secure
the obligations under the supplemental plan.
TransAlta Corporation • 2022 Integrated Report
F83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company provides other health and dental benefits to the age of 65 for both disabled members and
retired members through its other post-employment benefits plans. The latest actuarial valuations for
accounting purposes of the Canadian and US plans were as at Dec. 31, 2021 and Jan. 1, 2022, respectively.
The measurement date used to determine the present value obligation for both plans was Dec. 31, 2022.
The Company provides several defined contribution plans, including an Australian superannuation plan and a
US 401(k) savings plan, that provide for company contributions from 5 per cent to 11 per cent, depending on
the plan. Optional employee contributions are allowed for all the defined contribution plans.
B. Costs Recognized
The costs recognized in net earnings during the year on the defined benefit, defined contribution and other
post-employment benefits plans are as follows:
Year ended Dec. 31, 2022
Current service cost
Administration expenses
Interest cost on defined benefit obligation
Interest on plan assets
Defined benefit expense
Defined contribution expense
Net expense
Year ended Dec. 31, 2021
Current service cost
Administration expenses
Interest cost on defined benefit obligation
Interest on plan assets
Curtailment and amendment gain
Defined benefit expense
Defined contribution expense
Net expense
Year ended Dec. 31, 2020
Current service cost
Administration expenses
Interest cost on defined benefit obligation
Interest on plan assets
Curtailment and amendment gain
Defined benefit expense
Defined contribution expense
Net expense
Registered Supplemental
Other
Total
1
1
13
(9)
6
11
17
1
—
3
—
4
—
4
—
—
—
—
—
—
—
2
1
16
(9)
10
11
21
Registered Supplemental
Other
Total
3
1
12
(8)
(7)
1
8
9
2
—
2
—
—
4
—
4
1
—
—
—
—
1
—
1
6
1
14
(8)
(7)
6
8
14
Registered Supplemental
Other
Total
5
1
16
(11)
(2)
9
9
18
2
—
3
(1)
—
4
—
4
1
—
1
—
—
2
—
2
8
1
20
(12)
(2)
15
9
24
TransAlta Corporation • 2022 Integrated Report
F84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
C. Status of Plans
The status of the defined benefit pension and other post-employment benefit plans is as follows:
Year ended Dec. 31, 2022
Fair value of plan assets
Present value of defined benefit obligation
Funded status – plan deficit
Amount recognized in the consolidated financial
statements:
Accrued current liabilities
Other long-term liabilities
Total amount recognized
Year ended Dec. 31, 2021
Fair value of plan assets
Present value of defined benefit obligation
Funded status – plan deficit
Amount recognized in the consolidated financial
statements:
Accrued current liabilities
Other long-term liabilities
Total amount recognized
D. Plan Assets
Registered Supplemental
Other
274
(345)
(71)
(1)
(70)
(71)
15
(85)
(70)
(6)
(64)
(70)
—
(17)
(17)
(1)
(16)
(17)
Registered Supplemental
Other
339
(469)
(130)
(4)
(126)
(130)
14
(101)
(87)
(6)
(81)
(87)
—
(23)
(23)
(2)
(21)
(23)
Total
289
(447)
(158)
(8)
(150)
(158)
Total
353
(593)
(240)
(12)
(228)
(240)
The fair value of the plan assets of the defined benefit pension and other post-employment benefit plans is as
follows:
As at Dec. 31, 2020
Interest on plan assets
Net return (loss) on plan assets
Contributions
Benefits paid
Administration expenses
As at Dec. 31, 2021
Interest on plan assets
Net loss on plan assets
Contributions(1)
Benefits paid
Administration expenses
Change in foreign exchange rates
As at Dec. 31, 2022
Registered Supplemental
Other
367
8
14
5
(54)
(1)
339
9
(55)
38
(57)
(1)
1
274
14
—
(1)
6
(5)
—
14
—
—
6
(5)
—
—
15
—
—
—
1
(1)
—
—
—
—
—
—
—
—
—
Total
381
8
13
12
(60)
(1)
353
9
(55)
44
(62)
(1)
1
289
(1) The Company made a voluntary contribution of $35 million to further improve the funded status of the Sunhills Mining Ltd. Pension Plan
for the Highvale mine. The contribution reduces the amount of the Company's future funding obligations, including amounts secured by
the letters of credit.
TransAlta Corporation • 2022 Integrated Report
F85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the Company’s defined benefit plan assets by major category is as follows:
Level I
Level II
Level III
Total
As at Dec. 31, 2022
Equity securities
Canadian
US
International
Private
Bonds
AAA
AA
A
BBB
Below BBB
Loans
A
BBB
Alternative funds(1)
Money market and cash and cash equivalents
Total
(1) Alternative funds include investments in infrastructure and real estate funds.
As at Dec. 31, 2021
Equity securities
Canadian
US
International
Private
Bonds
AAA
AA
A
BBB
Below BBB
Money market and cash and cash equivalents
—
12
38
—
—
—
—
1
—
—
—
—
—
51
18
5
41
—
24
38
26
18
6
1
1
—
20
198
—
—
—
1
—
—
—
—
—
—
—
39
—
40
18
17
79
1
24
38
26
19
6
1
1
39
20
289
Level I
Level II
Level III
Total
—
—
47
—
—
—
—
1
—
—
29
20
79
—
28
54
36
24
10
20
4
—
—
1
—
—
—
—
—
—
5
33
20
126
1
28
54
36
25
10
20
353
Total
48
300
Plan assets do not include any common shares of the Company at Dec. 31, 2022 and Dec. 31, 2021.
TransAlta Corporation • 2022 Integrated Report
F86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
E. Defined Benefit Obligation
The present value of the obligation for the defined benefit pension and other post-employment benefit plans
is as follows:
Present value of defined benefit obligation as at Dec. 31, 2020
542
109
24
Registered Supplemental
Other
Current service cost
Interest cost
Benefits paid
Curtailment
Actuarial gain arising from financial assumptions
Actuarial gain arising from experience adjustments
3
12
(54)
(7)
(26)
(1)
2
2
(5)
—
(7)
—
1
—
(1)
—
(1)
—
Total
675
6
14
(60)
(7)
(34)
(1)
Present value of defined benefit obligation as at Dec. 31, 2021
469
101
23
593
Current service cost
Interest cost
Benefits paid
Actuarial gain arising from financial assumptions
Actuarial loss (gain) arising from experience adjustments
Change in foreign exchange rates
1
13
(57)
(83)
1
1
Present value of defined benefit obligation as at Dec. 31, 2022
345
1
3
(5)
(22)
7
—
85
—
—
1
(5)
(2)
—
17
2
16
(61)
(110)
6
1
447
The weighted average duration of the defined benefit plan obligation as at Dec. 31, 2022, is 9.9 years.
F. Contributions
The expected employer contributions for 2023 for the defined benefit pension and other post-employment
benefit plans are as follows:
Expected employer contributions
Registered Supplemental
1
6
Other
2
Total
9
TransAlta Corporation • 2022 Integrated Report
F87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
G. Assumptions
The significant actuarial assumptions used in measuring the Company’s defined benefit obligation for the
defined benefit pension and other post-employment benefit plans are as follows:
As at Dec. 31 (per cent)
Registered Supplemental Other Registered Supplemental Other
2022
2021
Accrued benefit obligation
Discount rate
Rate of compensation increase
Assumed health-care cost trend rate
Health-care cost escalation(1)(3)
Dental-care cost escalation
Benefit cost for the year
Discount rate
Rate of compensation increase
Assumed health-care cost trend rate
Health-care cost escalation(2)(4)
Dental-care cost escalation
4.7
2.6
—
—
2.8
2.9
—
—
5.0
3.0
—
—
2.8
3.0
—
—
5.0
—
7.1
4.2
2.7
—
6.8
4.7
2.8
2.9
—
—
2.4
2.9
—
—
2.8
3.0
—
—
2.3
3.0
—
—
2.7
—
6.8
4.0
2.3
—
7.1
4.0
(1) 2022 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2032 and remaining at that level thereafter for the US and
decreasing gradually by 0.3 per cent per year to 4.5 per cent in 2030 for Canada.
(2) 2022 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2031 and remaining at that level thereafter for the US and
decreasing gradually by 0.3 per cent per year to 4.5 per cent in 2030 for Canada.
(3) 2021 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2029 and remaining at that level thereafter for the US and
decreasing gradually by 0.3 per cent per year to 4.5 per cent in 2030 for Canada.
(4) 2021 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2029 and remaining at that level thereafter for the US and
decreasing gradually by 0.3 per cent per year to 4.5 per cent in 2030 for Canada.
H. Sensitivity Analysis
The following table outlines the estimated increase in the net defined benefit obligation assuming certain
changes in key assumptions:
Year ended Dec. 31, 2022
1% decrease in the discount rate
1% increase in the salary scale
1% increase in the health-care cost trend rate
10% improvement in mortality rates
Canadian plans
US plans
Registered Supplemental Other
Pension
31
1
—
12
10
—
—
2
2
—
1
—
2
—
—
1
TransAlta Corporation • 2022 Integrated Report
F88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. Joint Arrangements
Joint arrangements at Dec. 31, 2022, included the following:
Joint operations
Segment
Ownership
(per cent) Description
Sheerness
Goldfields Power
Fort Saskatchewan
Fortescue River Gas
Pipeline
Gas
Gas
Gas
Gas
McBride Lake
Wind and Solar
Soderglen
Pingston
Wind and Solar
Hydro
50
50
60
43
50
50
50
Dual-fuel facility in Alberta, of which TA Cogen has a 50 per cent
interest, operated by Heartland Generation Ltd., an affiliate of
Energy Capital Partners
Gas-fired facility in Australia operated by TransAlta
Cogeneration facility in Alberta, of which TA Cogen has a 60 per
cent interest, operated by TransAlta
Natural gas pipeline in Western Australia, operated by DBP
Development Group
Wind generation facility in Alberta operated by TransAlta
Wind generation facility in Alberta operated by TransAlta
Hydro facility in British Columbia operated by TransAlta
Joint venture
Segment
Ownership
(per cent) Description
Skookumchuck
Wind and Solar
49
Wind generation facility in Washington operated by Southern
Power
34. Cash Flow Information
A. Change in Non-Cash Operating Working Capital
Year ended Dec. 31
(Use) source:
Accounts receivable
Prepaid expenses
Income taxes receivable
Inventory
Accounts payable, accrued liabilities and provisions
Income taxes payable
Change in non-cash operating working capital
B. Changes in Liabilities from Financing Activities
2022
2021
2020
(869)
(28)
(79)
—
(61)
6
548
60
(316)
9
—
42
153
(2)
174
2
(4)
6
160
4
89
Balance
Dec. 31,
2021
Cash
issuances(1)
Repayments
and
dividends
paid(2)
New
leases
Dividends
declared
Foreign
exchange
impact
Other
Balance
Dec. 31,
2022
Long-term debt and lease
liabilities
3,267
981
(630)
Exchangeable securities
735
Dividends payable (common
and preferred)
62
—
—
40
—
—
—
—
(97)
—
103
39
—
—
(28)
3,669
4
—
739
68
Total liabilities from
financing activities
4,064
981
(727)
40
103
39
(24)
4,476
(1) Includes $449 million net increase in borrowings under credit facilities and an increase in issuance of long-term debt of $532 million.
(2) Includes a decrease of $621 million related to the repayment of long-term debt and a decrease in finance lease obligations of $9 million.
TransAlta Corporation • 2022 Integrated Report
F89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Balance
Dec. 31,
2020
Cash
issuances(1)
Repayments
and
dividends
paid(2)
New
leases
Dividends
declared
Foreign
exchange
impact
Other
Balance
Dec. 31,
2021
Long-term debt and lease
liabilities
3,361
Exchangeable securities
730
173
—
(214)
1
— —
—
—
(39)
(15)
3,267
—
5
735
Dividends payable (common
and preferred)
Total liabilities from financing
activities
59
—
(87) —
90
—
—
62
4,150
173
(301)
1
90
(39)
(10)
4,064
(1) Includes an increase in issuance of long-term debt of $173 million.
(2) Includes a net decrease of $114 million in borrowings under credit facilities, a decrease of $92 million related to the repayment of long-
term debt and a decrease in finance lease obligations of $8 million.
35. Capital
TransAlta’s capital is comprised of the following:
As at Dec. 31
Long-term debt(1)
Exchangeable securities
Bank overdraft
Equity
Common shares
Preferred shares
Contributed surplus
Deficit
2022
3,653
739
16
2021
Increase/
(decrease)
3,267
386
735
—
2,863
2,901
942
41
942
46
(2,514)
(2,453)
4
16
(38)
—
(5)
(61)
Accumulated other comprehensive income (loss)
(222)
146
(368)
Non-controlling interests
Less: available cash and cash equivalents
Less: principal portion of restricted cash on TransAlta OCP bonds(3)
Less: fair value asset of hedging instruments on long-term debt(4)
Total capital
879
(1,134)
(17)
(3)
1,011
(947)
(17)
(2)
(132)
(187)
—
(1)
5,243
5,629
(386)
(1) Includes lease liabilities, amounts outstanding under credit facilities, tax equity liabilities and current portion of long-term debt.
(2) The Company includes available cash and cash equivalents, as a reduction in the calculation of capital, as capital is managed internally
and evaluated by management using a net debt position. In this regard, these funds may be available and used to facilitate repayment of
debt.
(3) The Company includes the principal portion of restricted cash on TransAlta OCP bonds as this cash is restricted specifically to repay
outstanding debt.
(4) The Company includes the fair value of economic and designated hedging instruments on debt in an asset, or liability, position as a
reduction, or increase, in the calculation of capital, as the carrying value of the related debt has either increased, or decreased, due to
changes in foreign exchange rates.
TransAlta Corporation • 2022 Integrated Report
F90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s overall capital management strategy and its objectives in managing capital are as follows:
A. Maintain a Strong Financial Position
The Company operates in a long-cycle and capital-intensive commodity business and it is therefore a priority
to maintain a strong financial position that enables the Company to access capital markets at reasonable
interest rates.
Maintaining a strong balance sheet also allows our commercial team to contract the Company’s portfolio with
a variety of counterparties on terms and prices that are favourable to the Company’s financial results and
provides the Company with better access to capital markets through commodity and credit cycles. The
Company has an investment grade credit rating from DBRS Morningstar ("DBRS") (stable outlook). In 2022,
Moody's reaffirmed the Company's Long Term Rating of Ba1 with a stable outlook. DBRS reaffirmed the
Company's issuer rating and Unsecured Debt/Medium-Term Notes rating of BBB (low) and the Company's
Preferred Shares rating of Pfd-3 (low), all with stable outlook. In addition, S&P Global Ratings reaffirmed the
Company's Senior Unsecured Debt rating and Issuer Credit Rating of BB+ with stable outlook. The Company
remains focused on maintaining a strong financial position and cash flow coverage ratios. Credit ratings
provide information relating to the Company's financing costs, liquidity and operations and affect the
Company's ability to obtain short-term and long-term financing and/or the cost of such financing.
Management routinely monitors forecasted net earnings, cash flows, capital expenditures and scheduled
repayment of debt with a goal of meeting the above ratio targets and to meet dividend and PP&E expenditure
requirements.
B. Liquidity
For the years ended Dec. 31, 2022 and 2021, cash inflows and outflows are summarized below. The Company
manages variations in working capital using existing liquidity under credit facilities to ensure sufficient cash
and credit are available to fund operations, pay dividends, distribute payments to subsidiaries' non-controlling
interests and invest in PP&E.
Year ended Dec. 31
Cash flow from operating activities
Change in non-cash working capital
Cash flow from operations before changes in working capital
Dividends paid on common shares
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Property, plant and equipment expenditures
2022
877
316
1,193
(54)
(43)
(187)
(918)
2021
Increase
(decrease)
1,001
(124)
(174)
827
(48)
(39)
(156)
490
366
(6)
(4)
(31)
(480)
(438)
Inflow (outflow)
(9)
104
(113)
TransAlta maintains sufficient cash balances and committed credit facilities to fund periodic net cash
outflows related to its business. At Dec. 31, 2022, $1.0 billion (2021 – $1.3 billion) of the Company’s credit
facilities were fully available.
From time to time, TransAlta accesses capital markets, as required, to help fund some of these periodic net
cash outflows to maintain its available liquidity and maintain its capital structure and credit metrics within
targeted ranges.
TransAlta Corporation • 2022 Integrated Report
F91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36. Related-Party Transactions
Details of the Company’s principal operating subsidiaries at Dec. 31, 2022, are as follows:
Subsidiary
TransAlta Generation Partnership
TransAlta Cogeneration, L.P.
Country
Canada
Canada
TransAlta Centralia Generation, LLC
US
TransAlta Energy Marketing Corp.
Canada
TransAlta Energy Marketing (U.S.), Inc.
US
TransAlta Energy (Australia), Pty Ltd.
Australia
Ownership
(per cent)
Principal activity
100
Generation and sale of electricity
50.01
Generation and sale of electricity
100
100
100
100
Generation and sale of electricity
Energy marketing
Energy marketing
Generation and sale of electricity
TransAlta Renewables Inc.
Canada
60.1
Generation and sale of electricity
Associate or joint venture
Country
Ownership
(per cent)
Principal activity
SP Skookumchuck Investment, LLC
EMG International, LLC
US
US
49
30
Generation and sale of electricity
Wastewater treatment and biogas fuel to generate
electricity
Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not
disclosed. Associates and joint ventures have been equity accounted for by the Company.
A. Transactions with Key Management Personnel
TransAlta’s key management personnel include the President and Chief Executive Officer ("CEO") and
members of the senior management team that report directly to the President and CEO and the members of
the Board. Key management personnel compensation is as follows:
Year ended Dec. 31
Total compensation
Comprised of:
Short-term employee benefits
Post-employment benefits
Share-based payments
2022
23
2021
30
2020
27
11
1
11
14
1
15
12
2
13
B. TransAlta Renewables Acquisitions
North Carolina Solar
On Nov. 5, 2021, TransAlta completed the sale of a 100 per cent economic interest in the 122 MW portfolio of
solar facilities in North Carolina for US$102 million. Pursuant to the transaction, a TransAlta subsidiary owns
the North Carolina Solar facility directly and another subsidiary issued tracking preferred shares to TransAlta
Renewables reflecting the economic interest in the facilities.
Ada and Skookumchuck
On April 1, 2021, the Company completed the sale of its 100 per cent economic interest in the 29 MW Ada
cogeneration facility and its 49 per cent economic interest in the 137 MW Skookumchuck wind facility to
TransAlta Renewables for $43 million and $103 million, respectively. Pursuant to the transaction, a TransAlta
subsidiary owns Ada and Skookumchuck directly and another subsidiary issued tracking preferred shares to
TransAlta Renewables reflecting the economic interest in the facilities.
Big Level and Antrim
During 2021, TransAlta Renewables subscribed for additional tracking preferred shares in Big Level and
Antrim for $7 million (US$6 million). In addition, TransAlta Renewables repaid a portion of the total
outstanding promissory notes to the Company related to the Big Level and Antrim wind facilities in the
amount of $18 million (US$14 million).
TransAlta Corporation • 2022 Integrated Report
F92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Windrise Wind
On Feb. 26, 2021, TransAlta completed the sale of its 100 per cent direct interest in the 206 MW Windrise
wind facility to TransAlta Renewables, for $213 million.
WindCharger
On Aug. 1, 2020, the WindCharger battery storage project was sold to TransAlta Renewables for $12 million.
C. Repayment of the TransAlta Energy (Australia) ("TEA") loan
On Oct. 23, 2022, the outstanding intercompany loan balance of AU$157 million, plus all accrued and unpaid
interest, between TransAlta Renewables and TEA was fully repaid. The funds repaid will be reserved within
TEA and restricted to fund future growth in Australia that TransAlta Renewables has elected to participate in,
including the Northern Goldfields Solar and Battery project and the Mount Keith 132kV expansion project.
D. Transactions with Associates
In connection with the exchangeable securities issued to Brookfield, the investment agreement entitles
Brookfield to nominate two directors to the TransAlta Board. This allows Brookfield to participate in the
financial and operating policy decisions of the Company, and as such, they are considered associates of the
Company.
In addition to the exchangeable securities disclosed in Note 26, the Company may, in the normal course of
operations, enter into transactions on market terms with related parties that have been measured at
exchange value and recognized in the consolidated financial statements, including power purchase and sale
agreements, derivative contracts and asset management fees. Transactions and balances between the
Company and associates do not eliminate.
Transactions with Brookfield include the following:
Year ended Dec. 31
Power sales
Purchased power
Asset management fees paid
2022
127
12
2
2021
2020
27
3
2
10
3
1
37. Commitments and Contingencies
In addition to commitments disclosed elsewhere in the financial statements, the Company has incurred the
following additional contractual commitments, either directly or through its interests in joint operations.
Approximate future payments under these agreements are as follows:
2023
2024
2025
2026
2027
2028 and
thereafter
Natural gas, transportation and
other contracts
Transmission
Coal supply agreements
Long-term service agreements
Operating leases
Growth
TransAlta Energy Transition Bill
Total
56
10
83
51
3
446
6
655
47
7
87
49
3
—
—
45
7
71
35
3
—
—
193
161
45
3
—
32
2
—
—
82
46
457
1
—
21
2
—
—
39
—
140
29
—
—
Total
696
67
241
328
42
446
6
70
665
1,826
TransAlta Corporation • 2022 Integrated Report
F93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Commitments
A. Natural Gas, Transportation and Other Contracts
The Company has fixed price or volume natural gas purchase and transportation contracts. Included in these
contracts are 15-year natural gas transportation agreements for a total of 400 terajoules ("TJ") per day on a
firm basis to 2036 and an eight-year natural gas transportation agreement for 75 TJ per day related to the
Sheerness facility that is expected to end in 2030.
B. Transmission
The Company has several agreements to purchase transmission network capacity in Canada and the Pacific
Northwest. Provided certain conditions for delivering the service are met, the Company is committed to the
transmission at the supplier’s tariff rate whether it is awarded immediately, or delivered in the future, after
additional facilities are constructed.
C. Coal Supply Agreements
Various coal supply and associated rail transport contracts are in place to provide coal for use in production
at the Centralia thermal facility. The coal supply agreements allow TransAlta to take delivery of coal at fixed
volumes with dates extending to 2025.
D. Long-Term Service Agreements
TransAlta has various service agreements in place, primarily for inspections, repairs and maintenance that
may be required on natural gas facilities, equipment for gas and turbines at various wind facilities.
E. Operating Leases
Operating leases include lease commitments not recognized under IFRS 16 and lease commitments that have
not yet commenced, mainly related to buildings, vehicles and land.
F. Growth
Commitments for growth relate to the following projects: Horizon Hill wind project, White Rock wind projects,
Garden Plain wind project, Northern Goldfields Solar project and the Mount Keith 132kV expansion.
The current estimate of the capital expenditures related to the Kent Hills rehabilitation is approximately
$120 million, inclusive of insurance proceeds. Refer to Note 19 for amounts spent in 2022.
G. TransAlta Energy Transition Bill Commitments
As part of the TransAlta Energy Transition Bill signed into law in the State of Washington and the subsequent
Memorandum of Agreement ("MOA"), the Company has committed to fund US$55 million in total over the
remaining life of the Centralia coal plant to support economic and community development, promote energy
efficiency and develop energy technologies related to the improvement of the environment. The MOA
contains certain provisions for termination and in the event of the termination and certain circumstances, this
funding or portion thereof would no longer be required. As of Dec. 31, 2022, the Company has funded
approximately US$50 million of the commitment, which is recognized in other assets in the Consolidated
Statements of Financial Position.
TransAlta Corporation • 2022 Integrated Report
F94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contingencies
TransAlta is occasionally named as a party in various claims and legal and regulatory proceedings that arise
during the normal course of its business. TransAlta reviews each of these claims, including the nature of the
claim, the amount in dispute or claimed and the availability of insurance coverage. There can be no assurance
that any particular claim will be resolved in the Company’s favour or that such claims may not have a material
adverse effect on TransAlta. Inquiries from regulatory bodies may also arise in the normal course of business,
to which the Company responds as required.
The Company conducts internal reviews of its offers and offer behaviour in both the energy and ancillary
services markets in Alberta on an ongoing basis and will self-report suspected contraventions or respond to
inquiries from regulatory agencies as required. There currently is no certainty that any particular matter will be
resolved in the Company’s favour or that such matters may not have a material adverse effect on TransAlta.
I. Brazeau Facility - Claim against the Government of Alberta
On Sept. 9, 2022, the Company filed a Statement of Claim against the Government of Alberta in the Alberta
Court of King’s Bench seeking a declaration that: (i) granting mineral leases within five kilometres of the
Brazeau facility is a breach of a 1960 agreement between the Company and the Government of Alberta; and
(ii) the Government of Alberta is required to indemnify the Company for any costs or damages that result from
the risks of hydraulic fracturing near the Brazeau facility. On Sept. 29, 2022, the Government of Alberta filed
its Statement of Defence, which asserts, among other things, that the Company: (i) is trying to usurp the
jurisdiction of the Alberta Energy Regulator ("AER"); and (ii) is out of time under the Limitations Act (Alberta).
The trial is scheduled to take place during the first quarter of 2024.
II. Brazeau Facility - Well License Applications to Consider Hydraulic Fracturing
The AER issued a subsurface order on May 27, 2019 that does not permit any hydraulic fracturing within three
kilometres of the Brazeau facility but permits fracking in all formations (except the Duvernay) from three-to-
five kilometres of the Brazeau facility. Subsequently, two oil and gas operators submitted applications to the
AER for approval of 10 well licences (which include hydraulic fracturing activities) within three-to-five
kilometres of the Brazeau facility. The regulatory hearing to consider the applications - Proceeding 379 - is
currently scheduled to be heard between Feb. 27 and March 10, 2023. The Company's position is that
hydraulic fracturing activities within any formation within five kilometres of the Brazeau Facility pose an
unacceptable risk and that the applications should be denied.
III. Hydro PPA - Emission Performance Credits
Balancing Pool is claiming entitlement to the Emission Performance Credits ("EPCs") earned by the Alberta
Hydro facilities as a result of those facilities being opted into the Carbon Competitiveness Incentive
Regulation and Technology Innovation and Emissions Reduction Regulation from 2018 to 2020, inclusive. The
Balancing Pool claims ownership of the EPCs because it believes the change-in-law provisions under the
Hydro Power Purchase Arrangement require the EPCs to be passed through to the Balancing Pool. TransAlta
has not received any benefit from the EPCs nor from any purported change-in-law and believes that the
Balancing Pool has no rights to these credits. An arbitration has commenced and the hearing was scheduled
for Feb. 6 to 10, 2023. However, due to the resignation of one of the panel members, the hearing has been
adjourned. A new panel member has been appointed and a two-week hearing will be held from May 18 to
June 1, 2023. TransAlta holds approximately 1,750,000 EPCs with no recorded book value that were created
between 2018 and 2020, which are at risk as a result of the Balancing Pool's claim.
IV. Sundance A Decommissioning
TransAlta filed an application with the Alberta Utilities Commission ("AUC") seeking payment from the
Balancing Pool for TransAlta’s decommissioning costs for Sundance A, including its proportionate share of the
Highvale mine. The Balancing Pool and Utilities Consumer Advocate are participating as interveners because
they take issue with the decommissioning costs claimed by TransAlta. Due to various factors, including the
COVID-19 pandemic and significant information requests from the Balancing Pool, the application has been
delayed. While a hearing date has not been set, the application will likely be heard in the second half of 2023.
TransAlta Corporation • 2022 Integrated Report
F95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38. Segment Disclosures
A. Description of Reportable Segments
The Company has six reportable segments as described in Note 1.
The following tables provides each segment's results in the format that the TransAlta’s President and Chief
Executive Officer (the chief operating decision maker) ("CODM"), review the Company's segments to make
operating decisions and assess performance. The CODM assesses the performance of the operating
segments based on a measure of adjusted EBITDA. This measurement basis represents earnings before
income taxes, adjusted for the effects of: depreciation of property, plant and equipment and amortization of
intangibles, depreciation of right‐of‐use assets, finance lease income, unrealized mark-to-market gains or
losses, gains and losses related to closed positions effectively settled by offsetting positions with exchanges
recorded in the year the positions are settled, unrealized foreign exchange gains or losses on commodity
transactions, depreciation on our mining equipment included in fuel and purchased power, interest income
recorded on the prepaid funds, write-down of coal inventory and parts and material inventory related to the
Highvale mine and coal operations at our natural gas converted facilities, going off-coal which resulted in the
remaining coal supply payments on the existing coal supply agreement being recognized as an onerous
contract, impairment charges, share of (profit) loss of joint venture and other costs or income adjustments.
The tables below show the reconciliation of the total segmented results and adjusted EBITDA to the
statement of earnings (loss) reported under IFRS. Prior periods have been adjusted for comparable purposes.
For internal reporting purpose, the earnings information from the Company's investment in Skookumchuck
has been presented in the Wind and Solar segment on a proportionate basis. Information on a proportionate
basis reflects the Company's share of Skookumchuck's statement of earnings on a line-by-line basis.
Proportionate financial information is not and is not intended to be, presented in accordance with IFRS. Under
IFRS, the investment in Skookumchuck has been accounted for as a joint venture using the equity method.
TransAlta Corporation • 2022 Integrated Report
F96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B. Reported Adjusted Segment Earnings (Loss) and Segment Assets
I. Reconciliation of Adjusted EBITDA to Earnings before Income Tax
Year ended Dec. 31, 2022
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
606
303
1,209
714
160
(2) 2,990
(14)
—
2,976
Reclassifications and adjustments:
Unrealized mark-to-market
loss
Realized (gain) loss on
closed exchange positions
Decrease in finance lease
receivable
Finance lease income
1
104
251
—
—
(4)
—
—
—
—
46
19
Unrealized foreign exchange
gain on commodity
—
—
—
10
—
—
—
—
12
47
—
—
(1)
—
378
—
43
—
—
—
46
19
(1)
—
—
—
—
—
(378)
(43)
(46)
(19)
1
—
—
—
—
—
Adjusted revenues
607 407 1,521
724
218
(2) 3,475
(14)
(485)
2,976
Fuel and purchased power
22
31
641
566
Reclassifications and adjustments:
Australian interest income
—
—
(4)
—
Adjusted fuel and purchased
power
22
31
637
566
Carbon compliance
—
1
83
(1)
Gross margin
OM&A
Taxes, other than income
taxes
Net other operating (income)
loss
585 375 801
55
68
195
3
12
15
—
(23)
(38)
Insurance recovery
—
7
—
Adjusted net other operating
(income) loss
—
(16)
(38)
159
69
4
—
—
—
—
—
—
—
218
35
—
—
—
—
3
1,263
—
(4)
3
1,259
(5)
78
—
—
—
—
—
1,263
4
4
—
—
1,263
78
—
2,138
(14)
(489)
1,635
101
523
1
35
—
—
—
(61)
7
(54)
(2)
(2)
3
—
3
—
—
—
521
33
(58)
(7)
—
(7)
(58)
527
311
629
86
183
(102) 1,634
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Net interest expense
Foreign exchange gain
Gain on sale of assets and
other
Earnings before income taxes
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
9
19
(599)
(9)
(262)
4
52
353
TransAlta Corporation • 2022 Integrated Report
F97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended Dec. 31, 2021
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
383
323
1,109
709
211
4
2,739
(18)
—
2,721
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
—
25
(40)
19
(38)
—
(34)
Realized (gain) loss on closed
exchange positions(2)
—
Decrease in finance lease
receivable
Finance lease income
—
—
Unrealized foreign exchange
gain on commodity
—
—
—
—
—
(6)
41
25
(3)
—
—
—
—
29
—
23
—
—
—
—
—
—
41
25
(3)
—
—
—
—
—
34
(23)
(41)
(25)
3
—
—
—
—
—
Adjusted revenues
383
348
1,126
728
202
4
2,791
(18)
(52)
2,721
Fuel and purchased power
16
17
457
560
Reclassifications and adjustments:
Australian interest income
—
Mine depreciation
—
—
—
(4)
—
(79)
(111)
Coal inventory write-down
—
—
—
(17)
Adjusted fuel and purchased
power
16
17
374
Carbon compliance
—
—
118
Gross margin
367
331
634
OM&A
42
59
175
432
60
236
117
Reclassifications and adjustments:
Parts and materials
write-down
—
—
(2)
(26)
6
97
6
Curtailment gain
—
—
—
Adjusted OM&A
42
59
173
Taxes, other than income
taxes
Net other operating loss
(income)
3
10
13
—
—
(40)
48
Reclassifications and adjustments:
Royalty onerous contract and
contract termination penalties —
—
—
(48)
Adjusted net other operating
loss (income)
—
—
(40)
Adjusted EBITDA(3)
322
262 488
—
133
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Net interest expense
Foreign exchange gain
Gain on sale of assets and
other
Loss before income taxes
—
—
—
—
—
—
4
1,054
—
—
—
(4)
(190)
(17)
4
843
—
178
—
—
—
—
—
—
—
1,054
4
190
17
—
—
—
211
1,054
—
178
202
—
1,770
(18)
(263)
1,489
36
84
513
(2)
—
511
—
—
(28)
6
—
—
28
(6)
—
—
84
491
(2)
22
511
1
33
(1)
—
8
—
(48)
—
(40)
—
—
—
—
—
48
48
166
(85) 1,286
—
—
36
—
—
—
—
32
8
—
8
9
25
(529)
(648)
(245)
16
54
(380)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) In 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting
positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which
the transactions occur.
(3) Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
TransAlta Corporation • 2022 Integrated Report
F98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended Dec. 31, 2020
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
152
332
787
704
122
7
2,104
(3)
—
2,101
2
33
(14)
21
—
42
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
Realized gain on closed
exchange positions(2)
Decrease in finance lease
receivable
Finance lease income
Unrealized foreign
exchange loss on
commodity
—
—
—
—
—
—
—
—
17
7
—
—
4
Adjusted revenues
152
334
848
Fuel and purchased power
8
25
325
Reclassifications and adjustments:
Australian interest income
Mine depreciation
Coal inventory write-down
Adjusted fuel and purchased
power
Carbon compliance
—
—
—
8
—
—
—
—
25
—
(4)
(100)
—
221
120
Gross margin
144
309
507
OM&A
37
53
166
Taxes, other than income
taxes
2
Net other operating income
—
8
—
13
(11)
Reclassifications and adjustments:
Impact of Sheerness going
off-coal
Adjusted net other operating
income
—
—
—
(28)
—
(39)
—
—
—
—
690
435
—
(46)
(37)
352
48
290
106
9
—
—
—
(10)
—
(10)
—
—
—
133
—
—
—
—
—
—
133
30
—
—
—
—
—
—
17
7
—
4
7
2,164
12
805
—
—
—
(4)
(146)
(37)
12
618
(5)
163
—
1,383
80
472
1
—
33
(11)
—
(28)
—
(39)
105
248
367
175
103
(81)
917
Adjusted EBITDA(3)
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment charges
Net interest expense
Foreign exchange gain
Gain on sale of assets and
other
Loss before income taxes
—
—
—
—
—
(3)
—
—
—
—
—
—
(3)
—
—
—
—
—
(42)
10
(17)
(7)
(4)
—
—
—
—
—
(60)
2,101
—
805
4
146
37
187
—
—
—
—
805
163
(247)
1,133
—
—
—
28
28
472
33
(11)
—
(11)
1
7
(654)
(84)
(238)
17
9
(303)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) In 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting
positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which
the transactions occur.
(3) Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
TransAlta Corporation • 2022 Integrated Report
F99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
II. Selected Consolidated Statements of Financial Position Information
As at Dec. 31, 2022
Hydro
Wind
and
Solar
Gas
Energy
Transition
Energy
Marketing
Corporate
PP&E
437
2,837
1,858
313
Right-of-use assets
Intangible assets
Goodwill
6
2
258
As at Dec. 31, 2021
Hydro
98
157
176
Wind
and
Solar
6
49
—
2
5
—
—
—
8
30
111
14
31
—
Gas
Energy
Transition
Energy
Marketing
Corporate
PP&E
466
2,304
2,036
481
Right-of-use assets
Intangible assets
Goodwill
5
3
258
64
147
175
7
56
—
1
9
—
—
—
5
30
33
18
36
—
III. Selected Consolidated Statements of Cash Flows Information
Additions to non-current assets are as follows:
Total
5,556
126
252
464
Total
5,320
95
256
463
Year ended Dec. 31, 2022
Hydro
Additions to non-current assets:
PP&E
Intangible assets
36
—
Year ended Dec. 31, 2021
Hydro
Additions to non-current assets:
PP&E
Intangible assets
29
—
Year ended Dec. 31, 2020
Hydro
Additions to non-current assets:
PP&E
Intangible assets
22
—
Wind
and
Solar
745
19
Wind
and
Solar
166
—
Wind
and
Solar
174
—
Gas
Energy
Transition
Energy
Marketing Corporate
Total
43
—
19
—
—
3
75
9
918
31
Gas
Energy
Transition
Energy
Marketing Corporate
Total
167
—
90
1
—
—
28
8
480
9
Gas
Energy
Transition
Energy
Marketing Corporate
Total
199
—
78
1
—
—
13
13
486
14
IV. Depreciation and Amortization on the Consolidated Statements of Cash Flows
The reconciliation between depreciation and amortization reported on the Consolidated Statements of
Earnings (Loss) and the Consolidated Statements of Cash Flows is presented below:
Year ended Dec. 31
Depreciation and amortization expense on the Consolidated Statements of
Earnings (Loss)
Depreciation included in fuel and purchased power (Note 6)
Depreciation and amortization on the Consolidated Statements of Cash Flows
2022
2021
2020
599
—
599
529
190
719
654
144
798
TransAlta Corporation • 2022 Integrated Report
F100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2022
1,905
940
131
2021
1,854
731
136
2020
1,227
716
158
2,976
2,721
2,101
Property, plant and
equipment
Right-of-use
assets
Intangible assets
Other assets
2021
2022
2021
2022
2021
2022
2021
2022
3,817
1,307
432
4,051
860
409
49
74
3
5,556
5,320
126
52
39
4
95
123
101
28
252
141
85
30
62
34
64
15
61
66
256
160
142
C. Geographic Information
I. Revenues
Year ended Dec. 31
Canada
US
Australia
Total revenue
II. Non-Current Assets
As at Dec. 31
Canada
US
Australia
Total
D. Significant Customer
For the year ended Dec. 31, 2022, sales to the AESO represented 60 per cent of the Company’s total revenue
(2021 – sales to the AESO represented 35 per cent of the Company’s total revenue). There were no other
companies that accounted for more than 10 per cent of the Company's total revenue.
39. Subsequent Events
Early-Stage Pumped Hydro Development Project
On Feb. 16, 2023, the Company announced that it had entered into a definitive agreement to acquire a 50 per
cent interest in the Tent Mountain Renewable Energy Complex (“Tent Mountain”), an early-stage 320 MW
pumped hydro energy storage development project, located in southwest Alberta, currently owned by
Montem Resources Limited (“Montem”). The acquisition includes the land rights, fixed assets and intellectual
property associated with the pumped hydro development project. The Company will pay Montem
approximately $8 million upon closing the transaction with additional payments of up to $17 million
(approximately $25 million total) contingent on the achievement of specific development and commercial
milestones. The Company and Montem will form a partnership and jointly manage the project, with the
Company acting as project developer. The acquisition also includes the intellectual property associated with a
100 MW offsite green hydrogen electrolyser and a 100 MW offsite wind development project. The closing of
the transaction remains subject to customary closing conditions, including receipt by Montem of shareholder
approval, with closing expected to occur in March 2023.
TransAlta Corporation • 2022 Integrated Report
F101
Eleven-Year Financial and Statistical Summary
(in millions of Canadian dollars, except where noted)
Year ended Dec. 31
Financial Summary
STATEMENT OF EARNINGS
Revenues
Operating income (loss)
Earnings (loss) before income taxes
Net earnings (loss) attributable to common shareholders
STATEMENT OF FINANCIAL POSITION
Total assets
Current portion of long-term debt, net of cash and cash equivalents
Credit facilities, long-term debt and finance lease obligations
Exchangeable securities
Non-controlling interests
Preferred shares
Equity attributable to common shareholders(1)
Principal portion of restricted cash on TransAlta OCP and fair value (asset)
liability of hedging instruments on debt(1)
Total capital(2)
CASH FLOWS
Cash flow from operating activities
Cash flow from (used in) investing activities
COMMON SHARE INFORMATION (per share)
Net earnings (loss)
Comparable earnings(1)
Dividends declared on common share
Book value per common share (at year-end)(1)
Market price:
High
Low
Close (Toronto Stock Exchange at Dec. 31)
RATIOS (percentage except where noted)
Adjusted net debt to adjusted EBITDA(1,3,4) (times)
Return on equity attributable to common shareholders(1)
Comparable return on equity attributable to common shareholders(1)
Return on capital employed(1)
Comparable return on capital employed(1)
Earnings coverage (times)(1)
Dividend payout ratio based on FFO(1,4)
Adjusted EBITDA(1,3,4) (in millions of Canadian dollars)
Dividend coverage(1,4) (times)
Dividend yield(1)
Weighted average common shares for the year (in millions)
Common shares outstanding at Dec. 31 (in millions)
STATISTICAL SUMMARY
Number of employees
Gross installed capacity (MW)(5)
Energy Transition (7)
Gas(6,8)
Renewables (wind, solar and hydro)
Equity investments
Total generating capacity
Total generation production (GWh)
2022
2021
2020
2,976
531
353
4
10,741
(940)
3,475
739
879
942
168
(20)
2,721
(239)
(380)
(576)
9,226
(103)
2,423
735
1,011
942
640
(19)
5,243
5,629
877
(741)
0.01
n/a
0.21
0.62
15.28
10.52
12.11
2.2
1.0
n/a
9.2
n/a
2.2
4.1
1,634
18.3
1.7
271
268
1,001
(472)
(2.13)
n/a
0.19
2.37
14.61
9.57
14.05
2.6
(116.6)
n/a
(4.5)
n/a
(1.0)
5.1
1,286
23.0
1.3
271
271
2,101
(99)
(303)
(336)
9,747
(598)
3,256
730
1,084
942
1,410
(13)
6,811
702
(687)
(1.22)
n/a
0.22
5.13
11.23
5.32
9.67
4.0
(30.3)
n/a
(1.5)
n/a
(0.5)
7.0
917
15.6
1.7
275
270
1,282
1,282
1,476
671
3,084
2,828
67
6,650
21,258
1,472
3,084
2,694
67
7,387
22,105
2,548
3,082
2,498
67
8,265
24,980
Financial data presented is based on IFRS. Prior year figures that appear within the MD&A have been restated to conform with the current year’s presentation. All
other prior year figures have not been restated.
(1) These items are not defined and have no standardized meaning under IFRS. Periods for which the non-IFRS measure was not previously disclosed have not been
calculated. After 2016, comparable earnings measures are no longer being calculated or reported on.
(2) Total capital for 2011 to 2014 has been revised to align with the 2015 calculation methodology.
TransAlta Corporation • 2022 Integrated Report 252
ELEVEN-YEAR FINANCIAL AND STATISTICAL SUMMARY
2019
2018
2017
2016
2015
2014
2013
2012
2,397
2,267
2,623
2,292
478
314
117
148
221
(24)
10,996
10,947
2,307
138
(54)
(190)
10,304
433
2,960
—
1,059
942
2,384
(30)
7,748
626
87
(0.66)
n/a
0.16
8.28
8.50
6.88
7.45
3.6
(10.0)
n/a
2.1
n/a
0.6
4.3
2,347
335
193
52
9,508
102
2,699
326
1,101
942
2,019
(17)
7,172
849
(512)
0.18
n/a
0.12
7.14
10.14
5.50
9.28
3.9
3.3
n/a
4.1
n/a
1.5
6.6
984
18.6
1.7
283
277
2,249
160
(96)
(248)
9,428
59
3,119
—
1,137
942
2,055
(10)
7,275
820
(394)
(0.86)
n/a
0.20
7.16
7.90
5.44
5.59
3.6
(15.8)
n/a
0.7
n/a
0.2
6.1
1,123
18.3
2.9
287
285
334
3,722
—
1,152
942
2,569
(163)
8,556
744
(327)
0.41
0.13
0.3
8.92
7.54
3.76
7.43
3.8
5.4
1.7
5.3
4.4
1.7
8.1
33
4,408
—
1,029
942
2,419
(190)
8,641
432
(573)
(0.09)
(0.17)
0.72
8.52
12.34
4.13
4.91
5.4
(1.2)
(2.3)
4.6
3.0
1.5
30.0
867
3.3
14.7
280
284
1,062
1,144
14.1
2.1
288
288
11.1
4.0
288
288
442
239
141
9,833
708
3,305
—
594
942
2,342
(96)
7,795
796
(292)
0.52
0.25
0.83
8.52
14.94
9.81
10.52
4.2
6.3
3.0
5.8
5.1
1.7
26.4
1,036
5.7
7.9
273
275
195
(12)
(71)
9,624
175
4,130
—
517
781
2,125
(16)
7,712
765
(703)
(0.27)
0.31
1.16
7.92
16.86
12.91
13.48
4.6
(3.2)
3.7
2.8
5.2
0.8
43.1
1,023
6.3
8.6
264
268
2,210
(214)
(445)
(615)
9,503
582
3,610
—
330
—
3,018
50
7,590
520
(1,048)
(2.62)
0.50
1.16
8.78
21.37
14.11
15.12
4.6
(25.9)
4.9
(3.1)
5.3
(1.0)
25.1
1,015
4.7
7.7
235
255
1,543
1,883
2,228
2,341
2,380
2,786
2,772
2,084
2,915
3,049
2,421
—
8,385
29,071
3,147
2,819
2,308
—
8,273
28,409
3,707
2,827
2,289
—
8,823
36,900
3,707
2,906
2,334
—
8,947
38,157
3,708
2,823
2,350
—
8,881
40,673
3,693
2,949
2,204
—
8,846
45,002
3,693
3,197
2,202
396
9,488
3,140
3,142
2,058
390
8,730
42,482
38,750
(3) In 2022, the adjusted EBITDA composition was amended to include the impact of closed exchange positions that are effectively settled by offsetting positions
with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which the transactions occur. Therefore, the
Company has applied this composition to 2022, 2021, and 2020 only. In 2019 and onwards adjusted EBITDA was adjusted to exclude the impact of unrealized mark-
to-market gains or losses. 2018 and 2017 amounts were revised.
(4) 2016 and 2015 amounts were revised due to other revisions to EBITDA or FFO measures in the MD&A.
(5) 2012 to 2020 are gross installed capacity, which reflects the basis of underlying results. Prior year figures are as previously reported.
(6) Includes finance lease receivables.
(7) In 2021, Gas was adjusted to include the segments previously known as Australian Gas and North American Gas and the gas generation assets from the segment
previously known as Alberta Thermal. Prior year figures were revised.
(8) In 2021, Energy Transition was adjusted to include the segments previously known as Centralia and the coal generation assets from the segment previously
known as Alberta Thermal. Prior year figures were revised.
TransAlta Corporation • 2022 Integrated Report 253
ELEVEN-YEAR FINANCIAL AND STATISTICAL SUMMARY
Ratio Formulas
Adjusted net debt to Adjusted EBITDA = long-term debt and lease liabilities including current portion +
exchangeable securities + fair value (asset) liability of hedging instruments on debt + 50 per cent issued
preferred shares and exchangeable preferred shares - cash and cash equivalents - principal portion of
TransAlta OCP restricted cash / Adjusted EBITDA - PPA termination payments
Return on equity attributable to common shareholders = net earnings (loss) attributable to common
shareholders excluding gain on discontinued operations or earnings on a comparable basis / equity
attributable to common shareholders excluding AOCI
Return on capital employed = earnings (loss) before income taxes + net interest expense - net earnings
(loss) attributable to non-controlling interests / total capital - AOCI
Earnings coverage = earnings (loss) before income taxes + net interest expense / 50 per cent dividends paid
on preferred shares + interest on debt - interest income
Dividend payout ratio based on FFO = common share dividends paid / FFO - 50 per cent dividends paid on
preferred shares
Dividend coverage = FFO - cash dividends paid on preferred shares + change in non-cash operating working
capital balances / cash dividends paid on common shares
Dividend yield = dividends paid per common share / current year’s closing price
TransAlta Corporation • 2022 Integrated Report 254
Plant Summary
As at Dec. 31,
2022
Facility
Hydro
Brazeau, AB
24 facilities
Bighorn, AB
Spray, AB
Ghost, AB
Rundle, AB
Cascade, AB
Kananaskis, AB
Bearspaw, AB
Pocaterra, AB
Horseshoe, AB
Barrier, AB
Taylor, AB*
Interlakes, AB
Belly River, AB*
Three Sisters, AB
Waterton, AB*
St. Mary, AB*
Upper Mamquam, BC*
Pingston, BC*
Bone Creek, BC*
Akolkolex, BC*
Ragged Chute, ON*
Misema, ON*
Moose Rapids, ON*
Total Hydro
Wind &
Summerview 1, AB*
Battery Storage
Summerview 2, AB*
27 facilities
Ardenville, AB*
Blue Trail and
Macleod Flats, AB*
Castle River, AB*(3)
McBride Lake, AB*
Soderglen, AB*
Cowley North, AB*
Oldman, AB*
Sinnott, AB*
Windrise, AB*
WindCharger battery
storage, AB*
Nameplate
capacity
(MW)(1)
355
120
112
54
50
36
19
17
15
14
13
13
5
3
3
3
2
25
45
19
10
7
3
1
944
68
66
69
69
44
75
71
20
4
7
206
10
Consolidated
interest
Gross installed
capacity(1)
Ownership
(%)
Net capacity
ownership
interest
(MW)(1)(2)
Region
Revenue
source
Contract
expiry
date
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
50 %
100 %
100 %
100 %
100 %
100 %
355
120
112
54
50
36
19
17
15
14
13
13
5
3
3
3
2
25
23
19
10
7
3
1
922
68
66
69
69
44
38
36
20
4
7
206
10
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
355 Western Canada Merchant
120 Western Canada Merchant
112 Western Canada Merchant
54 Western Canada Merchant
50 Western Canada Merchant
36 Western Canada Merchant
19 Western Canada Merchant
17 Western Canada Merchant
15 Western Canada Merchant
14 Western Canada Merchant
13 Western Canada Merchant
13 Western Canada Merchant
5 Western Canada Merchant
3 Western Canada Merchant
3 Western Canada Merchant
3 Western Canada Merchant
2 Western Canada Merchant
25 Western Canada
LTC(12)
23 Western Canada
19 Western Canada
10 Western Canada
7
3
1
Eastern Canada
Eastern Canada
Eastern Canada
922
LTC
LTC
LTC
LTC
LTC
LTC
68 Western Canada Merchant
66 Western Canada Merchant
69 Western Canada Merchant
69 Western Canada Merchant
44 Western Canada Merchant
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2025
2023
2031
2046
2029
2027
2030
—
—
—
—
—
38 Western Canada
LTC
2024
36 Western Canada Merchant
20 Western Canada Merchant
4 Western Canada Merchant
7 Western Canada Merchant
—
—
—
—
206 Western Canada
LTC
2041
10 Western Canada Merchant
—
TransAlta Corporation • 2022 Integrated Report 255
Plant Summary
As at Dec. 31,
2022
Facility
Nameplate
capacity
(MW)(1)
Consolidated
interest
Gross installed
capacity(1)
Ownership
(%)
Net capacity
ownership
interest
(MW)(1)(2)
Region
Revenue
source
Contract
expiry
date
Melancthon, ON*(4)
Wolfe Island, ON*
Kent Breeze, ON*
Kent Hills, NB*(5)
Le Nordais, QC*
New Richmond, QC*
Wyoming Wind, WY*
Lakeswind, MN*
Big Level, PA*
Antrim, NH*
Skookumchuck, WA(6)
200
198
20
167
98
68
140
50
90
29
137
Total Wind
1,906
Solar
Mass Solar, MA*(7)
2 facilities
Total Solar
North Carolina Solar,
NC(8)
Gas
Keephills 2, AB
17 facilities
Keephills 3, AB
Poplar Creek, AB(9)
Sheerness, AB(4)
Sundance 6, AB
Fort Saskatchewan,
AB
Sarnia, ON*
Ottawa, ON
Windsor, ON
Ada, MI*(6)
Parkeston, WA*(11)
Southern Cross,
WA*(10)(11)
South Hedland, WA*
(11)
21
122
143
395
463
230
800
401
118
499
74
72
29
110
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
49 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
60 %
100 %
100 %
100 %
100 %
50 %
200
198
20
167
98
68
140
50
90
29
67
1,763
21
122
143
395
463
230
400
401
100 %
100 %
100 %
83 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
74
72
29
55
50 %
50 %
100 %
100 %
200
Eastern Canada
LTC 2028-2031
198
Eastern Canada
20
Eastern Canada
139
Eastern Canada
98
Eastern Canada
68
Eastern Canada
140
United States
United States
United States
United States
United States
50
90
29
67
1,735
LTC
LTC
LTC
LTC
LTC
LTC
LTC
LTC
LTC
LTC
2029
2031
2045
2033
2033
2028
2034
2034
2039
2040
21
United States
LTC 2032-2035
122
United States
LTC
2033
143
395 Western Canada Merchant
463 Western Canada Merchant
—
—
230 Western Canada
LTC
2030
200 Western Canada Merchant
401 Western Canada Merchant
—
—
2029
37
Eastern Canada
36
Eastern Canada
United States
Australia
Australia
LTC/
Merchant
LTC/
Merchant
LTC
LTC
LTC
2033
2031
2026
2026
2038
Australia
LTC
2042
29
55
245
150
2,775
71
50 %
35 Western Canada
LTC/
Merchant
499
100 %
499
Eastern Canada
LTC
2031
245
100 %
245
100 %
150
100 %
150
100 %
Total Gas
Energy
Transition
Centralia, WA
2 facilities
Skookumchuck, WA
Total Energy Transition
Total
3,586
670
1
671
7,250
100 %
100 %
3,084
670
1
671
6,583
100 %
100 %
670
United States
LTC/
Merchant
2025(13)
1
United States
LTC
2025
671
6,246
* TransAlta Renewables Inc. facility.
(1) Megawatts are rounded to the nearest whole number; columns may not add due to rounding. The gross installed capacity reflects the basis of consolidation of
underlying assets owned,
net capacity ownership interest deducts capacity attributable to non-controlling interest in these assets and is calculated after consolidation of underlying assets.
(2) Includes 100% of TransAlta Renewables assets. As of Dec. 31, 2022, TransAlta owns approximately 60% of the outstanding shares of TransAlta Renewables.
(3) Includes seven individual turbines at other locations.
(4) Comprised of two facilities.
(5) Comprised of three facilities.
(6) Effective Jan. 1, 2021, facility has been sold to TransAlta Renewables.
(7) Comprised of four ground-mounted sites and four roof-top sites.
(8) Comprised of 20 sites.
(9) The Poplar Creek plant is operated by Suncor and ownership of the facility will transfer to Suncor in 2030.
(10) Comprised of four facilities.
(11) Gas/diesel.
(12) LTC refers to Long-Term Contract.
(13) Contract is in place until 2025; however, Centralia Unit 1 was retired from service effective Dec. 31, 2020, and capacity decreased to 670 MW on Jan. 1, 2021.
TransAlta Corporation • 2022 Integrated Report 256
Sustainability Performance Indicators
Corporate Statistics
Environment Health & Safety ("EHS") Management Systems
2022
2021
2020
EHS management system audits(1)
Health and Safety compliance audits(2)
Total EHS audits
4
9
13
4
11
15
8
11
19
Environmental Performance (3)
2022
2021
2020
Resource or energy use(4)
Coal combustion (tonnes)
Natural gas combustion (GJ)
Diesel combustion (L)
Gasoline consumption: vehicle (L)
Diesel consumption: vehicle (L)
Propane consumption: vehicle (L)
Electricity: building operations (MWh)
Natural gas: building operations (GJ)
Propane: building operations (L)
Kerosene: building operations (L)
Total resource or energy use (GJ)
Greenhouse gas emissions(5)
Carbon dioxide (tonnes CO2e)
Methane (tonnes CO2e)
Nitrous oxide (tonnes CO2e)
Sulphur hexafluoride (tonnes CO2e)
Total greenhouse gas emissions (tonnes CO2e)(6) √
Greenhouse gas emission intensity (tonnes CO2e/MWh)(7) √
Scope 1 emissions (% of total GHG emissions)
Scope 2 emissions (% of total GHG emissions)
Scope 1 emissions reported to national regulatory bodies (%)
Air emissions(8)
Total sulphur dioxide emissions (tonnes) √
Sulphur dioxide emission intensity (kg/MWh) √
Total nitrogen oxide emissions (tonnes) √
Nitrogen oxide emission intensity (kg/MWh) √
Total particulate matter emissions (tonnes) √
Particulate matter emission intensity (kg/MWh) √
Total mercury emissions (kilograms) √
Mercury emission intensity (mg/MWh) √
2,181,000
4,094,000
6,637,000
130,023,000
106,768,000
82,917,000
6,706,000
7,596,000
6,955,000
609,000
864,000
933,000
3,275,000
6,705,000
10,971,000
12,000
6,000
6,000
152,000
174,000
186,000
35,000
119,000
135,000
169,000
189,000
198,000
3,000
65,000
48,000
194,954,000
203,716,000
278,977,000
10,183,000
12,420,000
16,246,000
24,000
41,000
200
25,000
59,000
370
34,000
80,000
110
10,248,000
12,505,000
16,361,000
0.40
99
1
100
0.60
99
1
100
0.67
99
1
100
1,000
0.05
7,000
0.35
12,000
0.49
11,000
14,000
21,000
0.43
400
0.02
20
0.77
0.69
2,200
0.11
40
1.94
0.88
4,000
0.16
60
2.33
TransAlta Corporation • 2022 Integrated Report 257
Sustainability Performance Indicators
Environmental Performance (continued)
2022
2021
2020
Water management(9)
Water withdrawal – water utility/municipality/customer (million m3)
Water withdrawal – surface water (million m3)
Water withdrawn – all sources (million m3) √
Water discharge – all sources (million m3) √
Water consumption (million m3) √
Water consumption intensity (m3/MWh)(10) √
Waste management(11)
Non-hazardous(12)
Landfill (tonnes) √
Landfill (L) √
Ash disposal: mine (tonnes)(13) √
Ash disposal: lagoon (tonnes)(14) √
Recycled (tonnes) √
Recycled (L)(15) √
Reuse (tonnes) √
Storage (tonnes) √
Compostable (tonnes)
Hazardous(16)
Landfill (tonnes) √
Landfill (L) √
Recycled (tonnes) √
Recycled (L) √
230
0
230
210
20
1.03
240
0
240
210
30
1.52
230
0
230
200
40
1.47
1,800
1,000
11,000
76,200
55,000
55,000
2,910
232,000
408,000
0
44,000
98,000
1,600
4,000
8,000
2,103,000
1,765,000
1,855,000
151,000
176,000
533,000
26,000
31,000
53,000
0
80
10
220
10
20
52,000
26,000
59,000
0
10
20
21,019,000
22,837,000 20,090,000
Land use and reclamation(17)
Land used in mining activities – disturbed (cumulative hectares) √
Land used in mining activities – reclaimed (cumulative hectares) √
Reclamation of land used in mining activities (% of land disturbed) √
Land used in mining activities: disturbed minus reclaimed (hectares) √
Land used by facilities, offices and equipment (hectares) √
12,600
4,800
38
7,800
5,000
12,600
12,600
4,800
4,800
38
7,700
5,000
38
7,700
4,900
Total land use (cumulative hectares) √
12,700
12,700
12,600
Environmental incidents(18)
Significant environmental incidents
Regulatory non-compliance environmental incidents
Total significant environmental incidents √
Environmental enforcement actions(19)
Environmental fines ($ thousands)
Environmental spills(20)
0
1
1
2
35
0
2
2
1
3
6
2
8
0
0
Volume of significant environmental spills (m3)
246
6
4
TransAlta Corporation • 2022 Integrated Report 258
Social Performance
Workplace practices
Employees
Number of full-time employees
Number of part-time employees
Number of contingent employees
Employees represented by independent trade union organizations (%)(21)
Voluntary employee turnover rate (%)(22)
Diversity
Women in workforce (% of all employees)
Women in senior management (%)
Women on Board of Directors (%)
Health and safety
Health and safety enforcement actions(23)
Health and safety fines ($ thousands)
Employee & contractor fatalities √
Lost-time injury (LTI) incidents (absence from work)(24) √
Medical aid (MA) incidents (no absence from work)(25) √
Restricted work injury (RWI) incidents (no absence from work)(26) √
Total recordable injuries to employees and contractors √
Sustainability Performance Indicators
2022
2021
2020
1,222
1,150
14
58
31
9
26
30
36
0
0
0
0
6
0
6
1,282
1,181
15
86
33
8
24
38
42
0
0
0
3
9
5
17
1,476
1,392
16
68
41
9
21
43
45
0
0
0
5
9
2
16
Exposure hours(27)
3,058,000
4,134,000
3,948,000
Total Recordable Injury Frequency (TRIF) (employees and
contractors)(28)√
0.39
0.82
0.81
Community relations
Community investments ($ millions)(29)
2.3
3.0
2.2
√ 2022 data has been third-party assured to a limited assurance level by Ernst & Young LLP.
Please see "Discussion and Notes on Numbers" for footnote explanations.
TransAlta Corporation • 2022 Integrated Report 259
Sustainability Performance Indicators
Alignment of Sustainability Performance Indicators with Best Practice Sustainability
Reporting Frameworks
The following outlines our sustainability or ESG performance indicator alignment with key criteria of GRI and
SASB. Internally developed criteria are described in the footnotes to the Sustainability Performance
Indicators.
Environment Health & Safety Management Systems
Alignment with GRI or SASB standards
EHS management system audits
Health and Safety compliance audits
Total EHS audits
Internally developed criteria
Internally developed criteria
Environmental Performance
Alignment with GRI or SASB standards
Resource or energy use
Coal combustion (tonnes)
Natural gas combustion (GJ)
Diesel combustion (L)
Gasoline consumption: vehicle (L)
Diesel consumption: vehicle (L)
Propane consumption: vehicle (L)
Electricity: building operations (MWh)
Natural gas: building operations (GJ)
Propane: building operations (L)
Kerosene: building operations (L)
Total resource or energy use (GJ)
Greenhouse gas emissions
Carbon dioxide (tonnes CO2e)
Methane (tonnes CO2e)
Nitrous oxide (tonnes CO2e)
Sulphur hexafluoride (tonnes CO2e)
Total greenhouse gas emissions (tonnes CO2e)
Greenhouse gas emission intensity (tonnes CO2e/MWh)
Scope 1 emissions (% of total GHG emissions)
Scope 2 emissions (% of total GHG emissions)
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
GRI 305-4
SASB IF-EU-110a.1
GRI 305-2
Scope 1 emissions reported to national regulatory bodies (%)
SASB IF-EU-110a.1
Air emissions
Total sulphur dioxide emissions (tonnes)
Sulphur dioxide emission intensity (kg/MWh)
Total nitrogen oxide emissions (tonnes)
Nitrogen oxide emission intensity (kg/MWh)
Total particulate matter emissions (tonnes)
SASB IF-EU-120a.1
Internally developed criteria
SASB IF-EU-120a.1
Internally developed criteria
SASB IF-EU-120a.1
TransAlta Corporation • 2022 Integrated Report 260
Sustainability Performance Indicators
Particulate matter emission intensity (kg/MWh)
Total mercury emissions (kilograms)
Mercury emission intensity (mg/MWh)
Internally developed criteria
SASB IF-EU-120a.1
Internally developed criteria
Environmental Performance (continued)
Alignment with GRI or SASB Standards
Water management
Water withdrawal – water utility/municipality/customer (million m3)
Water withdrawal – surface water (million m3)
Water withdrawn – all sources (million m3)
Water discharge – all sources (million m3)
Water consumption (million m3)
Water intensity (m3/MWh)
SASB IF-EU-140a.1
SASB IF-EU-140a.1
SASB IF-EU-140a.1
SASB IF-EU-140a.1
SASB IF-EU-140a.1
Internally developed criteria
Waste management
Non-hazardous
Landfill (tonnes)
Landfill (L)
Ash disposal: mine (tonnes)
Ash disposal: lagoon (tonnes)
Recycled (tonnes)
Recycled (L)
Reuse (tonnes)
Storage (tonnes)
Compostable (tonnes)
Hazardous
Landfill (tonnes)
Landfill (L)
Recycled (tonnes)
Recycled (L)
Land use and reclamation
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
Land used in mining activities – disturbed (cumulative hectares)
Internally developed criteria
Land used in mining activities – reclaimed (cumulative hectares)
Internally developed criteria
Reclamation of land used in mining activities (% of land disturbed)
Internally developed criteria
Land used in mining activities: disturbed minus reclaimed (hectares)
Internally developed criteria
Land used by plants, offices and equipment (hectares)
Total land use (cumulative hectares)
Internally developed criteria
Internally developed criteria
Environmental incidents
Significant environmental incidents
Internally developed criteria
TransAlta Corporation • 2022 Integrated Report 261
Sustainability Performance Indicators
Regulatory non-compliance environmental incidents
GRI 307-1
Total significant environmental incidents
Internally developed criteria
Environmental enforcement actions
Environmental fines ($ thousands)
Environmental spills
Volume of significant spills (m3)
GRI 307-1
GRI 307-1
GRI 306-3
Social Performance
Alignment with GRI or SASB Standards
Workplace practices
Employees
Number of full-time employees
Number of part-time employees
Number of contingent employees
Employees represented by independent trade union organizations (%)
Voluntary employee turnover rate (%)
Diversity
Women in workforce (% of all employees)
Women in senior management (%)
Women on Board of Directors (%)
Health and safety
Health and safety enforcement actions
Health and safety fines ($ thousands)
Employee & contractor fatalities
Lost-time injury (LTI) incidents (absence from work)
Medical aid (MA) incidents (no absence from work)
Restricted work injury (RWI) incidents (no absence from work)
Total injuries to employees & contractors
Exposure hours
GRI 102-7
Internally developed criteria
Internally developed criteria
Internally developed criteria
GRI 102-41
GRI 401-1
GRI 405-1
GRI 405-1
GRI 405-1
Internally developed criteria
Internally developed criteria
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
Total Recordable Injury Frequency (TRIF) (employees and contractors)
SASB IF-EU-320a.1
Community relations
Community investments ($ millions)
GRI 203-1
TransAlta Corporation • 2022 Integrated Report 262
SUSTAINABILITY PERFORMANCE INDICATORS
Discussion and Notes on Numbers
TransAlta strives to improve the accuracy and scope of our sustainability performance data. We continually
review our processes and controls relating to the measurement and calculation of key sustainability data
annually. Several footnotes appear throughout the statistical summary and are intended to provide clarity on
specific boundary conditions, changes in methodology and definitions. For questions or clarity on any key
performance indicators, please contact us at sustainability@transalta.com.
1.
EHS management system audits are conducted annually to assesses conformance to our environmental, health and
safety management systems.
2. Health and Safety compliance audits are conducted to verify compliance to internal health and safety standards and
procedures and defined occupational health and safety regulatory requirements.
3. We have updated some of our historical figures following a review of the data and a revision of our rounding
methodology. Data revisions that are significant in magnitude have been discussed below. Historical environmental
performance figures have been rounded based on the following methodology: i) All environmental data are rounded to
the nearest one thousand except where values are <1000, in which case they are rounded to the nearest 10; ii) Land
use data, which is smaller in magnitude compared with other environmental indicators, is rounded to the nearest 100 to
represent a more accurate picture of management and progress.
Energy use is calculated and reported from TransAlta-operated facilities, following the same approach we use for GHG
emissions reporting, which is the application of an ‘Operational Control’ boundary as per guidance from the GHG
Protocol: A Corporate Accounting and Reporting Standard.
4.
5. GHG emissions are calculated and reported from TransAlta-operated facilities in line with carbon compliance
regulations from the geographic jurisdiction where the facility is located. For GHG emissions that are not calculated
using jurisdictional carbon compliance guidance, we follow guidance from the GHG Protocol: A Corporate Accounting
and Reporting Standard (specifically ‘Setting Organizational Boundaries: Operational Control’ methodology). As per the
operational control methodology, TransAlta reports 100 per cent of GHG emissions from facilities at which we are the
operator. GHG emissions include emissions from stationary combustion, transportation use, building use and fugitive
emissions. We report both scope 1 and 2 emissions. We compile our corporate GHG inventory using our business
segment GHG calculations. All of our scope 1 emissions (100 per cent) are reported to national regulatory bodies in the
country in which we operate. This includes: Australia (National Greenhouse and Energy Reporting), Canada
(Greenhouse Gas Reporting Program, NPRI) and the US (EPA). Our scope 1 and 2 emissions use global warming
potentials and emissions factors that vary with respect to regional compliance guidance and include IPCC 4th
Assessment Report, Canada's GHG Inventory 1990-2019, US EPA eGRID Summary Tables 2019 and Australia NGERS
Measurement Determination. Applying harmonized global warming potentials and emission factors across our fleet
would result in a minor variance to our overall calculated GHG totals. An estimate of our scope 3 emissions can be
found in our 2022 MD&A.
6. Gross GHG emissions or gross CO2e emissions is the sum of carbon dioxide, methane, nitrous oxide and sulphur
hexafluoride (SF6). Consequently, the sum of scope 1 and 2 emissions will equate to gross CO2e emissions or gross
GHG emissions.
8.
7. GHG emission intensity is calculated by dividing total operational emissions by 100 per cent of production (MWh) from
operated facilities, irrespective of financial ownership. In 2022, our GHG emission intensity decreased from 2021 due
to the different approach in calculating our total production to include steam generation, which was omitted in
previous years. Therefore, intensity metrics are not comparable year over year.
Air emissions are calculated and reported from TransAlta-operated facilities, following the same approach we use for
GHG emissions reporting, which is the application of an ‘Operational Control’ boundary as per guidance from the GHG
Protocol: A Corporate Accounting and Reporting Standard. Air emissions are expressed in tonnes, except for mercury
emissions, which are represented in kilograms. Particulate matter emissions include both PM2.5 and PM10. Air emission
intensities are calculated by dividing total operational emissions by 100 per cent of production (MWh) from operated
facilities, irrespective of financial ownership. In 2022, our air emissions intensity decreased from 2021 due to the
different approach in calculating our total production to include steam generation, which was omitted in previous
years. Therefore, intensity metrics are not comparable year over year. Historical adjustments to 2021 particulate
matter emissions and intensity were made to reflect accrual adjustments for road dust at our Highvale facility.
9. Water use is calculated and reported from TransAlta-operated facilities, following the same approach we use for GHG
emissions reporting, which is the application of an ‘Operational Control’ boundary as per guidance from the GHG
Protocol: A Corporate Accounting and Reporting Standard. Total water consumed is measured by total water
withdrawal minus water discharge. Water is used primarily for cooling by our thermal power plants. Evaporative losses
from cooling ponds and cooling towers account for the majority of consumptive loss. The water lost to evaporation is
not returned directly to the water body, but the water remains in the hydrologic cycle. Water withdrawal, discharge
and consumption values for 2020 were adjusted to reflect a new rounding approach.
10. Water intensity is calculated by dividing total operational water consumption (m3) by 100 per cent of production (MWh)
from operated facilities, irrespective of financial ownership. In 2022, our water intensity decreased from 2021 due to
the different approach in calculating our total production to include steam generation, which was omitted in previous
years. Therefore, intensity metrics are not comparable year over year. Minor historical adjustment to 2020 water
consumption data (see Note 9) resulted in adjustments to 2020 water intensity data.
11. Adjustments were made to historical 2020 waste values to reflect accrued volumes from 2020 after we received final
waste manifests as part of the reclamation project at our Mississauga facility. As a result, approximately 23,000 tonnes
equivalent were added from Mississauga to multiple waste categories in 2020.
TRANSALTA CORPORATION
263
SUSTAINABILITY PERFORMANCE INDICATORS
12. Non-hazardous waste includes, but is not limited to, the disposal of water treatment chemicals, coal refuse (including
ash byproducts), metals, paper, cardboard and building materials. We measure and report the total weight of all types
of waste generated and use several methods for calculation, including direct measurement of quantity on site, by
transporters at the point of shipping or loading (consistent with shipping papers), by waste disposal contractor at the
point of waste disposal or by transporters, at the point of shipping or loading, and engineering estimates or process
knowledge.
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
15.
lagoons for disposal.
In 2021, we adjusted our reported 2020 non-hazardous waste recycled (L) volumes to reflect accrued volumes from
our Sarnia facility.
16. Hazardous wastes can be harmful to people, plants, animals or the environment, either in the short or the long term,
and TransAlta is required in all of its operating jurisdictions to follow proper procedures for landfill/recycling of these
materials. We measure and report the total weight of all types of waste generated and use several methods for
calculation, including direct measurement of quantity on site, by transporters at the point of shipping or loading
(consistent with shipping papers), by waste disposal contractor at the point of waste disposal or by transporters, at
the point of shipping or loading, and engineering estimates or process knowledge.
17. Land used in mining activities – disturbed refers to the total active footprint of our mining operations, which includes
the cumulative hectares for land cleared of vegetation, soil disturbed, ready for reclamation, soils placed, and
permanently reclaimed: (i) Disturbed means soil has been disturbed; (ii) Cleared means vegetation has been removed
and soils are intact; (iii) Reclamation means the restoration of disturbed lands to similar pre-development condition,
other economically productive use, or natural or semi-natural habitat. Land reclamation refers to the ratio between the
land that has been permanently or temporarily reclaimed and the total active footprint of our mining operations.
Reclamation is presented as a cumulative number; therefore, the total number of hectares reported from year to year
may increase depending on whether reclamation has occurred or whether re-disturbance of previously reclaimed
areas was required. Total land use refers to the total active footprint of all our operations or the sum of the land used
in mining activities plus land used by plants, offices and equipment. Land use calculations were modified in 2021 to
include a greater portion of the land used by TransAlta including all surrounding land and land leased to our customers.
As a result, minor adjustments were made to historical 2020 and 2019 data for land used by facilities, offices and
equipment.
18. Environmental incidents are separated into two categories: significant environmental incidents (internally defined) and
regulatory non-compliance environmental incidents (aligned to GRI 307-1). We define significant environmental
incidents as an incident that resulted in an impact to the environment with low level damage to the ecosystem that is
reversible within one to three years or mortalities of less than 0.2 per cent of a given species when compared to the
overall population. Our internal definition of significant environmental incidents in 2020 and 2019 included all incidents
involving mortality of a single listed species as reflected in our 2020 and 2019 reported values. We have updated our
internal definition to reflect what we deem to be a more appropriate way to measure a significant environmental event
related to species mortalities; the internal definition now takes into consideration mortality impacts to the species in
relation to overall species population. We define regulatory non-compliance environmental incidents as violations or
non-compliance to regulations or exceedance of limits in company operating approvals that result in enforcement
action including fines or stop work orders that suspend overall facility or site operations, but did not have an impact on
the environment. For example, a technical issue with a computer system for gathering real-time data could cause us to
be out of compliance with local regulation or our EMS, but there is no direct consequence for the physical environment.
19. Environmental enforcement actions are a violation or non-compliance to regulations or exceedance of limits in
company operating approvals that result in enforcement action including stop work orders, fines or suspension of
operating approvals.
20. Spills generally happen in low environmental impact areas and are almost always contained and fully recovered. It is
extremely rare that we experience large spills, which could adversely impact the environment and the Company.
In 2022, TransAlta had approximately 376 unionized workers working primarily in our operational business units.
21.
22. Voluntary turnover is aligned with our Human Resources voluntary turnover reporting methodology. As per this
methodology, voluntary turnover is any full-time, part-time or contingent employee initiated exit, excluding retirement.
Summer students and temporary workers are not considered within voluntary turnover.
23. Health and safety enforcement actions are a violation of or non-compliance with regulations or exceedance of limits in
company operating approvals that result in enforcement action including stop work orders, fines or suspension of
operating approvals.
24. Lost-time injuries (LTIs) are injuries that resulted in the worker being away from work beyond the day of the injury.
25. Medical aids (MAs) are injuries that resulted in medical treatment beyond first aid.
26. Restricted work injuries (RWIs) are injuries that resulted in the worker being unable to perform all normally scheduled
and assigned work activities.
27. Exposure hours are total hours worked by all TransAlta employees and contractors, and include full-time, part-time,
direct, contract, executive, labour, salary, hourly and seasonal employees in all locations, but exclude prime
contractors. Exposure hours have been rounded to the nearest thousand.
28. Total Recordable Injury Frequency (TRIF) measures restricted work, medical aid and lost-time injuries per 200,000
hours worked.
29. Cumulative of donations and sponsorship totals in the respective calendar year. This investment figure does not
include donations from our employees.
TransAlta Corporation • 2022 Integrated Report 264
Independent Practitioner’s Assurance Report
To Management of TransAlta Corporation (“TransAlta”)
Scope
We have been engaged by TransAlta Corporation (the “Company”, or “TransAlta”) to perform a ‘limited
assurance engagement,’ as defined by International Standards on Assurance Engagements, hereafter
referred to as the engagement, to report on TransAlta’s performance indicators detailed in the accompanying
schedule (the “Subject Matter”) for the year ended December 31, 2022, contained in TransAlta’s 2022 Annual
Integrated Report (the “Report”).
Other than as described in the preceding paragraph, which sets out the scope of our engagement, this
engagement did not include performing assurance procedures on the remaining information included in the
Report, and accordingly, we do not express a conclusion on this information.
Criteria Applied by TransAlta
In preparing the Subject Matter, TransAlta applied relevant guidance contained within the Sustainability
Accounting Standards Board (“SASB”) Standards, Global Reporting Initiative (“GRI”) Sustainability Reporting
Standards, and internally developed criteria, as detailed in the accompanying Schedule, collectively referred
to herein as (the “Criteria”). The internally developed Criteria were specifically designed for the preparation of
the Report. As a result, the Subject Matter may not be suitable for another purpose.
TransAlta’s Responsibilities
TransAlta’s management is responsible for selecting the Criteria, and for presenting the Subject Matter in
accordance with that Criteria, in all material respects. This responsibility includes establishing and maintaining
internal controls, maintaining adequate records and making estimates that are relevant to the preparation of
the Subject Matter, such that it is free from material misstatement, whether due to fraud or error.
EY’s Responsibilities
Our responsibility is to express a conclusion on the presentation of the Subject Matter based on the evidence
we have obtained.
We conducted our engagement in accordance with the International Standard for Assurance Engagements
(“ISAE”) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information
(“ISAE 3000”) and ISAE 3410, Assurance Engagements on Greenhouse Gas Statements (“ISAE 3410”). These
standards require that we plan and perform our engagement to obtain limited assurance about whether, in all
material respects, the Subject Matter is presented in accordance with the Criteria, and to issue a report. The
nature, timing and extent of the procedures selected depend on our judgment, including an assessment of the
risk of material misstatement, whether due to fraud or error.
We believe that the evidence obtained is sufficient and appropriate to provide a basis for our limited
assurance conclusion.
Our Independence and Quality Control
We have complied with the relevant rules of professional conduct / code of ethics applicable to the practice
of public accounting and related to assurance engagements, issued by various professional accounting
bodies, which are founded on fundamental principles of integrity, objectivity, professional competence and
due care, confidentiality and professional behaviour.
EY applies Canadian Standard on Quality Control 1, Quality Control for Firms that Perform Audits and Reviews
of Financial Statements, and Other Assurance Engagements, and accordingly maintains a comprehensive
system of quality control including documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
Description of Procedures Performed
Procedures performed in a limited assurance engagement vary in nature and timing from, and are less in
extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a
limited assurance engagement is substantially lower than the assurance that would have been obtained had a
reasonable assurance engagement been performed. Our procedures were designed to obtain a limited level
of assurance on which to base our conclusion and do not provide all the evidence that would be required to
provide a reasonable level of assurance.
TransAlta Corporation • 2022 Integrated Report 265
INDEPENDENT PRACTITIONER'S ASSURANCE REPORT
Although we considered the effectiveness of management’s internal controls when determining the nature
and extent of our procedures, our assurance engagement was not designed to provide assurance on internal
controls. Our procedures did not include testing controls or performing procedures relating to checking
aggregation or calculation of data within IT systems.
A limited assurance engagement consists of making enquiries, primarily of persons responsible for preparing
the Subject Matter and related information, and applying analytical and other appropriate procedures.
Our procedures included:
• Conducting interviews with relevant personnel to obtain an understanding of the reporting
processes;
Inquiries of relevant personnel who are responsible for the Subject Matter including, where relevant,
observing and inspecting systems and processes for data aggregation and reporting in accordance
with the Criteria;
Assessing the accuracy of data, through analytical procedures and limited reperformance of
calculations, where applicable, and tested, on a limited sample basis, underlying source information
to support completeness and accuracy of the Subject Matter; and
Reviewing presentation and disclosure of the Subject Matter in the Report
•
•
•
We also performed such other procedures as we considered necessary in the circumstances.
Inherent Limitations
The Greenhouse Gas ("GHG") quantification process is subject to scientific uncertainty, which arises because
of incomplete scientific knowledge about the measurement of GHGs. Additionally, GHG procedures are
subject to estimation (or measurement) uncertainty resulting from the measurement and calculation
processes used to quantify emissions within the bounds of existing scientific knowledge.
Non-financial information, such as the Subject Matter, is subject to more inherent limitations than financial
information, given the more qualitative characteristics of the subject matter and the methods used for
determining such information. The absence of a significant body of established practice on which to draw
allows for the selection of different but acceptable evaluation techniques which can result in materially
different evaluation and can impact comparability between entities and over time.
Conclusion
Based on our procedures and the evidence obtained, nothing has come to our attention that causes us to
believe that the Subject Matter for the year ended December 31, 2022, is not prepared, in all material
respects, in accordance with the Criteria.
Ernst & Young LLP
February 22, 2023
Calgary, Canada
TransAlta Corporation • 2022 Integrated Report 266
INDEPENDENT PRACTITIONER'S ASSURANCE REPORT
Schedule
Our limited assurance engagement was performed on the following Subject Matter for the year ended
December 31, 2022:
Performance Indicator
Criteria
Value Unit of Measure
Greenhouse Gas Emissions
Total (Scope 1 and Scope 2)
greenhouse gas emissions
SASB IF-EU-110a.1
Greenhouse gas emission
intensity
GRI 305-4
10,248,000 tonnes CO2e
0.4 tonnes CO2e /MWh
Air Emissions
Total sulphur dioxide
emissions
SASB IF-EU-120a.1
1,000 tonnes
Sulphur dioxide emission
intensity
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Total nitrogen oxide emissions SASB IF-EU-120a.1
0.05 kg/MWh
11,000 tonnes
Nitrogen oxide emission
intensity
Total particulate matter
emissions
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
SASB IF-EU-120a.1
Particulate matter emission
intensity
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Total mercury emissions
SASB IF-EU-120a.1
Mercury emission intensity
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Water Management
Water withdrawn – all sources SASB IF-EU-140a.1
Water discharge – all sources
SASB IF-EU-140a.1
Water consumption
SASB IF-EU-140a.1
Water consumption intensity
SASB IF-EU-140a.1
Waste Management
Non-hazardous
0.43 kg/MWh
400 tonnes
0.02 kg/MWh
20 kg
0.77 mg/MWh
230 million m3
210 million m3
20 million m3
1.03 m3/MWh
TransAlta Corporation • 2022 Integrated Report 267
INDEPENDENT PRACTITIONER'S ASSURANCE REPORT
Performance Indicator
Criteria
Value Unit of Measure
Landfill
Landfill
Ash disposal: mine
Ash disposal: lagoon
Recycled
Recycled
Reuse
Storage
Hazardous
Landfill
Landfill
Recycled
Recycled
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
GRI 306-2
1,800
tonnes
76,200
litres
2,910
tonnes
0
tonnes
1,600
tonnes
2,103,000
litres
151,000
tonnes
26,000
tonnes
80
tonnes
52,000
litres
0
tonnes
21,019,000
litres
Land Use and Reclamation
Land used in mining activities
– disturbed
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Land used in mining activities
– reclaimed
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Land reclamation (used in
mining activities)
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Land used in mining activities:
disturbed minus reclaimed
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Land used by facilities, offices
and equipment
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
12,600 cumulative hectares
4,800 cumulative hectares
38 % of land disturbed
7,800 hectares
5,000 hectares
Total land use
Environmental Incidents
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
12,700 cumulative hectares
Total significant environmental
incidents
Internally developed criteria as described in the
footnotes to the Sustainability Performance
Indicators of the Report
Health and Safety
Employee & contractor
SASB IF-EU-320a.1(1)
fatalities
Lost-time injury (LTI) incidents SASB IF-EU-320a.1(1)
SASB IF-EU-320a.1(1)
Medical aid (MA) incidents
Restricted work injury (RWI)
incidents
Total recordable injuries to
employees & contractors
SASB IF-EU-320a.1(1)
SASB IF-EU-320a.1(1)
Total Recordable Injury
Frequency (TRIF) (employees
and contractors)
SASB IF-EU-320a.1(1)
1 Number
0 Number
0 Number
6 Number
0 Number
6 Number
0.39 Rate
(1) Other criteria, included in the SASB Disclosure IF-EU-320a.1 Section 3, near miss frequency rate (NMFR) is excluded from the scope of our limited assurance engagement.
TransAlta Corporation • 2022 Integrated Report 268
Shareholder Information
Special Services for Registered Shareholders
Service
Description
Direct deposit for dividend payments
Automatically have dividend payments deposited to your bank account
Account consolidations
Eliminate costly duplicate mailings by consolidating account registrations
Address changes and share transfers
Receive tax splits and dividends without the delays resulting from address and ownership
changes
Stock Splits and Share Consolidations
Date
Events
May 8, 1980
February 1, 1988
December 31, 1992
Stock split
Stock split(1)
Reorganization — TransAlta Utilities shares exchanged for TransAlta Corporation shares(2)
1:1
The valuation date value of common shares owned on December 31, 1971, adjusted for stock splits, is $4.54 per share.
(1) The adjusted cost base for shares held on January 31, 1988, was reduced by $0.75 per share following the February 1, 1988, share split.
(2) TransAlta Utilities Corporation became a wholly owned subsidiary of TransAlta Corporation as a result of this reorganization.
Dividend Declaration for Common Shares
Dividends are paid quarterly as determined by the Board. Dividends on our common shares are at the
discretion of the Board. In determining the payment and level of future dividends, the Board considers our
financial performance, results of operations, cash flow and needs with respect to financing our ongoing
operations and growth, balanced against returning capital to shareholders. The Board continues to focus on
building sustainable earnings and cash flow growth.
Common Share Dividends Declared in 2022
Payment Date
Record Date
April 1, 2022
July 1, 2022
October 1, 2022
January 1, 2023
April 1, 2023
March 1, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Ex-Dividend Date
February 28, 2022
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Dividend
$0.050
$0.050
$0.050
$0.055
$0.055
Submission of Concerns Regarding Accounting or Auditing Matters
TransAlta has adopted a procedure for employees, shareholders or others to report concerns or complaints
regarding accounting or other matters on an anonymous, confidential basis to the Audit, Finance and Risk
Committee of the Board of Directors. Such submissions may be directed to the Audit and Risk Committee c/o
the Chief Officer, Legal, Regulatory and External Affairs, of the Company.
Dividend Declaration for Preferred Shares
Series A: Fixed cumulative preferential cash dividends are paid quarterly when declared by the Board at the
annual rate of $0.71924 per share from and including March 31, 2021, to, but excluding, March 31, 2026.
Series B: Floating cumulative preferential cash dividends are paid quarterly when declared by the Board from
and including March 31, 2021, to, but excluding, March 31, 2026.
Series C: Fixed cumulative preferential cash dividends are paid quarterly when declared by the Board at the
annual rate of $1.46352 per share from and including June 30, 2022, to, but excluding, June 30, 2027.
Series D: Floating cumulative preferential cash dividends are paid quarterly when declared by the Board from
and including June 30, 2022, to, but excluding, June 30, 2027.
Series E: Fixed cumulative preferential cash dividends are paid quarterly when declared by the Board at the
annual rate of $1.72352 per share from and including September 30, 2022, to, but excluding, September 30,
2027.
TransAlta Corporation • 2022 Integrated Report 269
SHAREHOLDER INFORMATION
Series G: Fixed cumulative preferential cash dividends are paid quarterly when declared by the Board at the
annual rate of $1.247 per share from and including September 30, 2019, to, but excluding, September 30,
2024.
Record Date
March 1, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Record Date
March 1, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Preferred Share Dividends Declared in 2022
Series A
Payment Date
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
Series B
Payment Date
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
Series C
Payment Date
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
Series D
Payment Date
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
Series E
Payment Date
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
Series G
Payment Date
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
March 31, 2023
Record Date
March 1, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Record Date
March 1, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Record Date
March 1, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Record Date
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
Ex-Dividend Date
February 28, 2022
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Ex-Dividend Date
February 28, 2022
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Ex-Dividend Date
February 28, 2022
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Ex-Dividend Date
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Ex-Dividend Date
February 28, 2022
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Ex-Dividend Date
February 28, 2022
May 31, 2022
August 31, 2022
November 30, 2022
February 28, 2023
Dividend
$0.17981
$0.17981
$0.17981
$0.17981
$0.17981
Dividend
$0.13309
$0.16505
$0.22099
$0.33700
$0.37991
Dividend
$0.25169
$0.25169
$0.36588
$0.36588
$0.36588
Dividend
$0.25169
$0.28841
$0.40442
$0.45578
Dividend
$0.32463
$0.32463
$0.32463
$0.43088
$0.43088
Dividend
$0.31175
$0.31175
$0.31175
$0.31175
$0.31175
Dividends are paid on the last day of the month in March, June, September and December. When a dividend payment date falls on a
weekend or holiday, the payment is made on the following business day. Only dividend payments that have been approved by the Board of
Directors are included in this table. The Board of Directors has also declared dividends on the Series I Preferred Shares, which are held by an
affiliate of Brookfield Renewable Partners.
TransAlta Corporation • 2022 Integrated Report 270
SHAREHOLDER INFORMATION
Voting Rights
Common shareholders receive one vote for each common share held.
Annual Meeting
The Annual and Special Meeting of Shareholders will be held in a virtual-only meeting format at 12:30 p.m.,
Mountain standard time, on Friday, April 28, 2023.
Transfer Agent
Computershare Trust Company of Canada North America:
Suite 800, 324 - 8th Avenue SW
Calgary, Alberta T2P 2Z2
Phone
1.800.564.6253 toll-free
Outside North America:
514.982.7555
Fax
North America:
1.888.453.0330 toll-free
Outside North America:
403.267.6529
Website:
www.investorcentre.com
Exchanges
Toronto Stock Exchange (TSX)
New York Stock Exchange (NYSE)
Ticker Symbols
TransAlta Corporation common shares: TSX: TA, NYSE: TAC
TransAlta Corporation preferred shares: TSX: TA.PR.D, TA.PR.E,
TA.PR.F, TA.PR.G, TA.PR.H, TA.PR.J
Additional Information
Requests can be directed to:
Investor Relations
Phone
Email
TransAlta Corporation
North America:
investor_relations@transalta.com
110 - 12th Avenue SW
1.800.387.3598 toll-free
Website
P.O. Box 1900, Station “M”
Calgary/outside North America:
www.transalta.com
Calgary, Alberta T2P 2M1
403.267.2520
TransAlta Corporation • 2022 Integrated Report 271
Shareholder Highlights
Ten-Year Total Shareholder Return vs. S&P/TSX Composite Index
Year ended December 31
($)
TransAlta
S&P/TSX
13
100
100
14
83
15
42
16
66
17
67
18
51
19
87
20
93
111
101
123
134
122
150
158
21
137
198
22
120
186
This chart compares what $100 invested in TransAlta and the S&P/TSX Composite Index at the end of 2013 would be worth today, assuming
the reinvestment of all dividends.
Source: FactSet
Ten-Year Market Value vs. Book Value
Year ended
December 31
($ per share)
Market Value
Book Value
Data is from 2013 onwards.
Source: FactSet and TransAlta
13
14
13.48
10.52
7.92
8.52
15
4.91
8.52
16
7.43
8.92
17
7.45
8.28
18
5.59
7.16
19
9.28
7.14
20
9.67
5.13
21
22
14.05
12.11
2.37
0.62
Monthly Volume and Market Prices
2022
Volume (millions)
TSX closing price ($
per share)
Source: FactSet
Jan
15
Feb
12
Mar
21
Apr
14
May
17
Jun
18
Jul
13
Aug
19
Sep
20
Oct
14
Nov
18
Dec
13
13.79
12.87
12.94
13.78
14.42
14.69
14.66
12.33
12.21
12.00
12.56
12.11
Return on Common Shareholders' Equity
(%)
ROE
13
(3.2)
14
6.3
15
(1.2)
16
5.4
17
18
(10.0)
(15.8)
19
3.3
20
21
(30.3)
(116.6)
22
1.0
Source: TransAlta
TransAlta Corporation • 2022 Integrated Report 272
Corporate Information
Corporate Governance:
New York Stock Exchange Disclosure
Differences
TransAlta’s Corporate Governance Guidelines,
Board Charter, Committee Charters, position
descriptions for the Chair and President & CEO,
and codes of business conduct and ethics are
available on our website at www.transalta.com.
Also available on our website is a summary of the
significant ways in which TransAlta’s corporate
governance practices differ from those required to
be followed by US domestic companies under the
New York Stock Exchange’s listing standards.
Currently there are no significant differences
between our governance practices and those of
the New York Stock Exchange.
Ethics Helpline
The Board of Directors has established an
anonymous and confidential Internet portal, email
address and toll-free telephone number for
employees, contractors, shareholders and other
stakeholders who wish to report accounting
irregularities, ethical violations or any other
matters they wish to bring to the attention of the
Board.
phone
Ethics Helpline
is
The
1.855.374.3801 (US/Canada) and 1.800.40.5308
(Australia)
Internet portal: transalta.com/ethics-helpline
Email: ethics_helpline@transalta.com
number
Any communications to the Board of Directors
may also be sent to
corporate_secretary@transalta.com.
TransAlta Corporate Officers
John Kousinioris
President and Chief Executive Officer
Todd Stack
Executive Vice President, Finance and
Chief Financial Officer
President of TransAlta Renewables Inc.
Jane Fedoretz
Executive Vice President, People, Talent and
Transformation
Kerry O'Reilly Wilks
Executive Vice President, Legal, Commercial and
External Affairs
Chris Fralick
Executive Vice President, Generation
Blain van Melle
Executive Vice President, Alberta Business
Aron Willis
Executive Vice President, Growth
Shasta Kadonaga
Senior Vice President, Shared Services
Brent Ward
Senior Vice President, M&A, Strategy and
Treasurer
Chief Financial Officer of TransAlta Renewables
Inc.
Michelle Cameron
Vice President and Corporate Controller
Scott Jeffers
Vice President and Corporate Secretary
TransAlta Corporation • 2022 Integrated Report 273
GLOSSARY OF KEY TERMS
Glossary of Key Terms
Adjusted Availability
Availability is adjusted when economic conditions
exist, such that planned routine and major
maintenance activities are scheduled to minimize
expenditures. In high price environments, actual
outage schedules would change to accelerate the
generating unit's return to service.
Alberta Electric System Operator (AESO)
Alberta Electric System Operator; the independent
system operator and regulatory authority for the
Alberta Interconnected Electric System.
Alberta Hydro Assets
The Company's hydroelectric assets owned
through a wholly owned subsidiary, TA Alberta
Hydro LP. These assets are located in Alberta and
consist of the Barrier, Bearspaw, Bighorn, Brazeau,
Cascade,
Interlakes,
Kananaskis, Pocaterra, Rundle, Spray and Three
Sisters hydro facilities.
Horseshoe,
Ghost,
long-term
Alberta Power Purchase Arrangement
(Alberta PPA)
A
established by
regulation for the sale of electric energy from
formerly regulated generating units to PPA buyers
in Alberta.
arrangement
Alberta Thermal
The business segment previously disclosed as
Canadian Coal has been renamed to reflect the
ongoing conversion of the boilers to burn gas in
place of coal. The segment includes the legacy
and converted generating units at our Sundance
and Keephills sites and includes the Highvale
mine.
Ancillary Services
As defined by the Electric Utilities Act, ancillary
services are those services required to ensure
that
is
operated in a manner that provides a satisfactory
level of service with acceptable levels of voltage
and frequency.
interconnected electric system
the
AUC
Alberta Utilities Commission (AUC).
Availability
A measure of time, expressed as a percentage of
continuous operation - 24 hours a day, 365 days a
year - that a generating unit is capable of
generating electricity, regardless of whether or
not it is actually generating electricity.
Balancing Pool
The Balancing Pool was established in 1999 by the
Government of Alberta to help manage the
in Alberta's electric
transition to competition
industry.
and
current
responsibilities are governed by the Electric
Utilities Act (effective June 1, 2003) and the
Balancing Pool Regulation. For more information
go to www.balancingpool.ca.
obligations
Their
Boiler
A device
for power,
for generating steam
processing or heating purposes, or for producing
hot water for heating purposes or hot water
supply. Heat from an external combustion source
is transmitted to a fluid contained within the tubes
of the boiler shell.
Capacity
Generation equipment's rated, continuous load-
carrying ability, expressed in megawatts.
Carbon Tax
Sets a carbon price per tonne of GHG emissions
related to transportation fuels, heating fuels and
other small emission sources.
Cash-Generating Unit (CGU)
A cash-generating unit is the smallest identifiable
group of assets that generates cash inflows that
are largely independent of the cash inflows from
other assets or groups of assets, and goodwill is
allocated to each CGU or group of CGUs that is
expected to benefit from the synergies of the
acquisition from which the goodwill arose.
Centralia
The business segment previously disclosed as US
Coal has been renamed to reflect the sole asset.
Cogeneration
A generating facility that produces electricity and
another form of useful thermal energy (such as
heat or steam) used for industrial, commercial,
heating or cooling purposes.
Derate
To lower the rated electrical capability of a power
generating facility or unit.
TransAlta Corporation • 2022 Integrated Report 274
is
securities
legislation
Disclosure Controls and Procedures (DC&P)
Refers to controls and other procedures designed
to ensure that information required to be disclosed
in the reports filed by the Company or submitted
under
recorded,
processed, summarized and reported within the
in applicable securities
time frame specified
legislation. DC&P
limitation,
controls and procedures designed to ensure that
information required to be disclosed by the
Company in its reports that it files or submits
under
is
accumulated and communicated to management,
including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
include, without
applicable
legislation
securities
Dispatch Optimization
Purchasing power to fulfil contractual obligations,
when economical.
Emissions Performance Standards ("EPS")
Under the Government of Ontario, emission
performance standards establish greenhouse gas
(GHG) emissions limits for covered facilities.
Environmental Management Systems (EMS)
A set of processes and practices that enable an
organization to reduce its environmental impacts
and increase its operating efficiency.
EPCs
Emission Performance Credits.
Force Majeure
Literally means “greater force.” A clause in a
contract that excuses a party from liability if some
unforeseen event beyond the control of that party
prevents it from performing its obligations under
the contract.
Free Cash Flow (FCF)
Amount of cash generated by the Company
through its operations (cash from operations)
minus the funds used by the Company for the
purchase, improvement or maintenance of the
long-term assets to improve the efficiency or
capacity of the Company (capital expenditures).
Funds from Operations (FFO)
Calculated as cash flow from operating activities
before changes in working capital and is adjusted
for transactions and amounts that the Company
believes are not representative of ongoing cash
flows from operations.
GLOSSARY OF KEY TERMS
Gigajoule (GJ)
A metric unit of energy commonly used in the
energy industry. One GJ equals 947,817 British
thermal units (Btu). One GJ is also equal to 277.8
kilowatt hours.
Gigawatt (GW)
A measure of electric power equal to 1,000
megawatts.
Gigawatt Hour (GWh)
A measure of electricity consumption equivalent to
the use of 1,000 megawatts of power over a
period of one hour.
Global Reporting Initiative (GRI)
The world's most widely used sustainability
standards.
international
organization that helps businesses and other
organizations take responsibility for their impacts
by providing them with the global common
language to communicate those impacts.
independent,
An
Greenhouse Gas (GHG)
A gas that has the potential to retain heat in the
including water vapour, carbon
atmosphere,
dioxide,
oxide,
methane,
hydrofluorocarbons and perfluorocarbons.
nitrous
Heat Rate
A measure of conversion, expressed as British
thermal units per Megawatt hour, of the amount of
thermal energy required to generate electrical
energy.
ICFR
Internal control over financial reporting.
IFRS
International Financial Reporting Standards.
KH Bonds
The Kent Hills Wind LP ("KHLP") non-recourse
project bonds secured by, among other things, the
Kent Hills 1, 2 and 3 wind facilities.
Megawatt (MW)
A measure of electric power equal to 1,000,000
watts.
Megawatt Hour (MWh)
A measure of electricity consumption equivalent to
the use of 1,000,000 watts of power over a period
of one hour.
Merchant
A term used to describe assets that are not
contracted and are exposed to market pricing.
TransAlta Corporation • 2022 Integrated Report 275
GLOSSARY OF KEY TERMS
NCIB
Normal Course Issuer Bid.
OM&A
Operations, maintenance and administration costs.
Other Hydro Assets
The Company's hydroelectric assets located in
British Columbia and Ontario and assets owned by
TransAlta Renewables, which include the Taylor,
Belly River, Waterton, St. Mary, Upper Mamquam,
Pingston, Bone Creek, Akolkolex, Ragged Chute,
Misema, Galetta, Appleton and Moose Rapids
facilities.
Pioneer Pipeline
The Pioneer gas pipeline
jointly owned and
operated by TransAlta and Tidewater Midstream
and Infrastructure Ltd.
Planned Outage
Periodic planned shutdown of a generating unit for
major maintenance and
is
normally in weeks. The time is measured from unit
shutdown to putting the unit back online.
repairs. Duration
Power Purchase Agreement (PPA)
A long-term agreement established by regulation
for the sale of electric energy to PPA buyers.
PPA Termination Payments
The Balancing Pool terminated the Sundance B
and C Power Purchase Arrangements, and as a
result, paid TransAlta $157 million in the first
quarter of 2018 as well as an additional $56 million
(plus GST and interest) on winning the arbitration
against the Balancing Pool in the third quarter of
2019.
PP&E
Property, plant and equipment.
Renewable Energy Credits (REC)
All right, title, interest and benefit in and to any
credit, reduction right, offset, allocated pollution
right, emission reduction allowance, renewable
attribute or other proprietary or contractual right,
whether or not tradable, resulting from the actual
or assumed displacement or
reduction of
emissions, or other environmental characteristic,
from the production of one MWh of electrical
energy from a facility utilizing certified renewable
energy technology.
Renewable Power
terrestrial
Power generated
mechanisms including wind, geothermal, solar and
biomass with regeneration.
renewable
from
Spark Spread
A measure of gross margin per megawatt (sales
price less cost of natural gas).
Sustainability Accounting Standards Board
(SASB)
Connects businesses and
the
financial impacts of sustainability. SASB Standards
identify the subset of ESG issues most relevant to
financial performance in each of the 77 covered
industries.
investors on
Task Force on Climate-Related Financial
Disclosures (TCFD)
Designed to solicit consistent, decision-useful,
forward-looking information on the material
financial impacts on climate-related risks and
opportunities, including those related to the global
transition to a low-carbon economy. They are
adopted by all organizations with public debt or
equity in G20 jurisdictions for use in mainstream
financial filings.
Total Injury Frequency (TIF)
Safety metric that tracks the total number of
injuries, including minor first aids, relative to
exposure hours worked.
Total Recordable Injury Frequency (TRIF)
Tracks the number of more serious injuries and
excludes minor first aids, relative to exposure
hours worked.
Turbine
A machine for generating rotary mechanical power
from the energy of a stream of fluid (such as
water, steam or hot gas). Turbines convert the
kinetic energy of fluids to mechanical energy
through the principles of impulse and reaction or a
mixture of the two.
Turnaround
Periodic planned shutdown of a generating unit for
major maintenance and
is
normally in weeks. The time is measured from unit
shutdown to putting the unit back online.
repairs. Duration
Unplanned Outage
The shutdown of a generating unit due to an
unanticipated breakdown.
Value at Risk (VaR)
A measure used to manage exposure to market
risk from commodity risk management activities.
TransAlta Corporation • 2022 Integrated Report 276
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TransAlta Corporation
110 - 12th Avenue SW
Box 1900, Station “M”
Calgary, Alberta
Canada T2P 2M1
403.267.7110
www.transalta.com