As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/17/08  Transalta Corp                    40-F       12/31/07    6:7.4M                                   Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 40-F        Annual Report by a Canadian Issuer                  HTML   3.76M 
 2: EX-23.1     Consent of Ernst and Young LLP Chartered            HTML     13K 
                          Accountants                                            
 3: EX-31.1     Certification of CEO Pursuant to Section 302 and    HTML     14K 
                          Section 404 of the Sarbanes-Oxley Act of               
                          2002                                                   
 4: EX-31.2     Certification of CFO Pursuant to Section 302 and    HTML     14K 
                          Section 404 of the Sarbanes-Oxley Act of               
                          2002                                                   
 5: EX-32.1     Certification of President and CEO Pursuant to      HTML     11K 
                          Section 906 of the Sarbanes-Oxley Act of               
                          2002                                                   
 6: EX-32.2     Certification of CFO Pursuant to Section 906 of     HTML     11K 
                          the Sarbanes-Oxley Act of 2002                         

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 40-F

 

[Check one]

 

o            REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

x         ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended

December 31, 2007

Commission file number

001-15214

 

 

TRANSALTA CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

Not applicable

(Translation of Registrant’s name into English (if applicable))

 

 

Canada

(Province or other jurisdiction of incorporation or organization)

 

 

4911

(Primary Standard Industrial Classification Code Number (if applicable))

 

 

Not Applicable

(I.R.S Employer Identification Number (if applicable))

 

 

110-12^th Avenue S.W., Box 1900, Station “M”,

Calgary, Alberta, Canada, T2P 2M1,

(403) 267-7110

(Address and telephone number of Registrant’s principal executive offices)

 

 

CT Corporation System, 111 8^th Avenue, 13^th Floor,

New York, New York, 10011, (212) 894-8400

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

 

At December 31, 2007, 201,366,771 common shares were issued and outstanding.

 

Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the file number assigned to the Registrant in connection with such Rule.

 

Yes  o

82-

No x

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  x

No o

 

INCORPORATION BY REFERENCE

 

The documents (or portions thereof) forming part of this Form 40-F are incorporated by reference into the following registration statements under the Securities Act of 1933, as amended.

 

Form	Registration No.
S-8	333-72454
S-8	333-101470
F-10	333-87762

 

CONSOLIDATED AUDITED ANNUAL FINANCIAL STATEMENTS

AND MANAGEMENT’S DISCUSSION & ANALYSIS

 

A.                        Consolidated Audited Annual Financial Statements

 

For consolidated audited annual financial statements, including the report of independent chartered accountants with respect thereto, see pages 69 through 109 of the TransAlta Corporation 2007 Annual Report to shareholders included herein.  See Exhibit 13.4 for the related supplementary note entitled “Reconciliation to United States Generally Accepted Accounting Principles” for a reconciliation of the important differences between Canadian and United States generally accepted accounting principles.

 

 

B.                        Management’s Discussion & Analysis

 

For management’s discussion & analysis, see pages 27 through 68 of the TransAlta Corporation 2007 Annual Report to shareholders included herein under the heading “Management’s Discussion & Analysis.”

 

For the purposes of this Form 40-F, only pages 69 through 109 and 27 through 68 of the TransAlta Corporation 2007 Annual Report to shareholders as referred to above shall be deemed incorporated herein by reference and filed, and the balance of such 2007 Annual Report, except as otherwise specifically incorporated by reference in the TransAlta Corporation Annual Information Form filed as Exhibit 13.1 hereto, shall not be deemed to be filed under the Exchange Act with the Securities and Exchange Commission as part of this Form 40-F.

 

DISCLOSURE CONTROLS AND PROCEDURES

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.  Disclosure controls and procedures 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 the Exchange Act 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.  In designing and evaluating our disclosure controls and procedures, 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 management was required to apply its judgment in evaluating and implementing possible controls and procedures.  Based on the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2007, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

 

MANAGEMENT’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

 

Internal control over financial reporting refers to a process designed by, or under the supervision of, our chief executive officer and chief financial officer and effected by our board of directors, management and other personnel, 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 and includes those policies and procedures that:

 

·	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

 

 

·	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and members of our board of directors; and
·	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

 

Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2007 using the framework set forth in the report of the Treadway Commission’s Committee of Sponsoring Organizations (COSO), “Internal Control — Integrated Framework.”  Management has concluded that our internal control over financial reporting was effective as of December 31, 2007.  Certain matters relating to the scope of Management’s evaluation and limitations of management’s conclusions are described below.  See “Limitations and Scope of Management’s Report on Internal Control over Financial Reporting.”

 

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report expressing an opinion on the effectiveness of our internal control over financial reporting as of December 31, 2007.  For Ernst & Young LLP’s report see page 71 of the TransAlta Corporation 2007 Annual Report to shareholders under the heading “Independent Auditors’ Report on Internal Controls Under Standards of the Public Company Accounting Oversight Board (United States)”.

 

There has been no change in the internal control over financial reporting during the year covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

LIMITATIONS AND SCOPE OF MANAGEMENT’S

REPORT ON 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 control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.  Internal control over financial reporting also can be circumvented by collusion or improper override.  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 into the process safeguards to reduce, though not eliminate, this risk.

 

Management has not evaluated the internal controls of the Sheerness, CE Generation and Genesee 3 joint ventures (collectively, the “Excluded Entities”), in accordance with Frequently Asked Question No. 1, “Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports,” of the Office of the Chief Accountant of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (revised Oct. 6, 2004).  Accordingly, management’s evaluation of the Company’s internal control over financial reporting did not include an evaluation of the internal controls of any of the Excluded Entities, and management’s conclusion regarding the effectiveness of the Company’s internal control over financial reporting does not extend to the internal controls of any of the Excluded Entities.

 

 

TABLE OF CONTENTS

 

PRESENTATION OF INFORMATION ................................................................................................................................................			1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ........................................................................................			1
MANAGEMENT’S DISCUSSION AND ANALYSIS .........................................................................................................................			1
CORPORATE STRUCTURE ................................................................................................................................................................			1
OVERVIEW ...........................................................................................................................................................................................			2
GENERAL DEVELOPMENT OF THE BUSINESS .............................................................................................................................			3
BUSINESS OF TRANSALTA ...............................................................................................................................................................			6
Generation Business Segment ............................................................................................................................................................			6
Commercial Operations Development ..............................................................................................................................................		14
ENVIRONMENTAL RISK MANAGEMENT ....................................................................................................................................		17
RISK FACTORS ...................................................................................................................................................................................		18
EMPLOYEES .......................................................................................................................................................................................		18
CAPITAL STRUCTURE ......................................................................................................................................................................		19
CREDIT RATINGS ..............................................................................................................................................................................		20
DIVIDENDS .........................................................................................................................................................................................		20
MARKET FOR SECURITIES .............................................................................................................................................................		21
DIRECTORS AND OFFICERS ...........................................................................................................................................................		21
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .................................................................		26
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS ...........................................................		26
LEGAL PROCEEDINGS AND REGULATORY ACTIONS .............................................................................................................		26
TRANSFER AGENT AND REGISTRAR ...........................................................................................................................................		27
INTERESTS OF EXPERTS .................................................................................................................................................................		27
ADDITIONAL INFORMATION .........................................................................................................................................................		27
AUDIT AND RISK COMMITTEE ......................................................................................................................................................		27
APPENDIX “A” .................................................................................................................................................................................	A-1
APPENDIX “B” .................................................................................................................................................................................	B-1

 

(i)

 

PRESENTATION OF INFORMATION

 

Unless otherwise noted, the information contained in this annual information form (“Annual Information Form”) is given as at or for the year ended December 31, 2007.  Amounts are expressed in Canadian dollars unless otherwise indicated.  Financial information is presented in accordance with Canadian generally accepted accounting principles.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Information Form, the documents incorporated by reference in this Annual Information Form, and other  reports and filings made with the securities regulatory authorities in Canada and the United States include forward-looking statements.  All forward-looking statements are based on TransAlta Corporation’s (“TransAlta” or the “Corporation”) beliefs and assumptions from information available at the time the assumption was made.  In some cases, forward-looking statements can be identified by terms such as “may”, “will”, “believe”, “expect”, “potential”, “enable”, “continue” or other comparable terminology.  Forward-looking statements relate to, among other things, statements regarding the anticipated business prospects and financial performance of TransAlta.  These statements are not guarantees of TransAlta’s future performance and are subject to risks, uncertainties and other important factors that could cause TransAlta’s actual performance to be materially different from those projected, including those material risks discussed in this Annual Information Form under the heading “Risk Factors”, and in TransAlta’s Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for the year ended December 31, 2007 under the heading “Risk Factors and Risk Management”.  The material assumptions in making these forward-looking statements are disclosed in the MD&A under “Outlook”, “Risk Factors and Risk Management” and “Critical Accounting Policies and Statements”, and in this Annual Information Form under “Competitive Environment”, and “Competitive Strengths”.  Given these uncertainties, the reader should not place undue reliance on this forward-looking information, which is given as of the date it is expressed in this Annual Information Form or otherwise, and TransAlta undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

TransAlta’s MD&A for the year ended December 31, 2007 and TransAlta’s Audited Consolidated Financial Statements for the year ended December 31, 2007 are hereby specifically incorporated by reference in this Annual Information Form.  Copies of these documents are available on SEDAR at www.sedar.com.

 

CORPORATE STRUCTURE

 

Name and Incorporation

 

TransAlta was formed by Certificate of Amalgamation issued under the Canada Business Corporations Act on October 8, 1992.  On December 31, 1992 a Certificate of Amendment was issued in connection with a plan of arrangement involving the Corporation and TransAlta Utilities Corporation (“TransAlta Utilities”) under the Canada Business Corporations Act.  The plan of arrangement, which was approved by shareholders on November 26, 1992, resulted in common shareholders of TransAlta Utilities exchanging their common shares for shares of the Corporation on a one-for-one basis.  Upon completion of the arrangement, TransAlta Utilities became a wholly-owned subsidiary of TransAlta.  The registered office and principal place of business of TransAlta is at 110 - 12^th Avenue S.W., Calgary, Alberta, Canada, T2R 0G7.

 

Information relating to TransAlta Utilities is set forth in TransAlta Utilities’ Annual Information Form for the year ended December 31, 2007, a copy of which is available on SEDAR at www.sedar.com.

 

1

 

Intercorporate Relationships

 

The principal subsidiaries of the Corporation and their respective jurisdictions of formation are set out below.

 

Unless the context otherwise requires, all references to the “Corporation” and to “TransAlta” herein refer to TransAlta Corporation and its subsidiaries, including TransAlta Utilities and TransAlta Energy Corporation (“TransAlta Energy”).

 

OVERVIEW

 

TransAlta and its predecessors have been engaged in the production and sale of electric energy since 1911.  The Corporation is among Canada’s largest non-regulated wholesale electricity generation and energy marketing companies with an aggregate net ownership interest of approximately 8,488 megawatts (“MW”) of electrical generating capacity (1) in facilities having approximately 10,209 MW of aggregate gross electrical generating capacity.  The Corporation is focused on generating electricity in Canada, the United States, Mexico and Australia through its diversified portfolio of facilities fuelled by coal, gas, hydro, wind and geothermal resources.  The following is a brief overview of the Corporation’s principal facilities.

 

In Canada, the Corporation holds a net ownership interest of approximately 5,634 MW of electrical generating capacity in thermal, gas-fired, wind-powered and hydroelectric facilities, including 4,937 MW in Alberta and 697 MW in Ontario.

 

2

 

Note:

 

⁽¹⁾   TransAlta measures capacity as net maximum capacity (see glossary for definition of this and other key terms) which is consistent with industry standards.  Capacity figures represent capacity owned and in operation unless otherwise stated.

 

In the United States, the Corporation’s principal facilities include a 1,404 MW thermal facility and a 248 MW gas-fired facility, both located in Centralia, Washington, which supply electricity to the Pacific northwest.  The Corporation holds a 50 per cent interest in CE Generation, LLC (“CE Generation”), resulting in an aggregate net ownership interest of approximately 385 MW of geothermal and gas fired electrical generating capacity in facilities in California, Texas, Arizona and New York.  The Corporation also has 6 MW of electrical generating capacity through gas-fired and hydroelectric facilities located in Washington and Hawaii.

 

In Mexico, the Corporation owns two facilities with a combined capacity of 511 MW.  (See “Recent Developments” below in this AIF for updated information regarding the Mexican assets.)

 

The Corporation also has 300 MW of net electrical generating capacity in Australia.

 

The Corporation is organized into two business segments: Generation and Corporate Development and Marketing. The Generation group is responsible for constructing, operating and maintaining electricity generation facilities.  The Commercial Operations Development group is responsible for managing the sale of production, purchases of natural gas, transmission capacity and market risks associated with the Corporation’s generation assets and for non-asset backed trading activities.  Both segments are supported by a corporate group which includes finance, treasury, legal, human resources and other administrative functions.  The corporate group is also responsible for the Corporation’s sustainable development initiatives, including investments in renewable energy resources.

 

GENERAL DEVELOPMENT OF THE BUSINESS

 

The significant events and conditions affecting TransAlta’s business during the last three financial years are summarized below.  Certain of these events and conditions are discussed in greater detail under the heading “Business of TransAlta” in this Annual Information Form.

 

Recent Developments

 

·                  On February 20, 2008, the Corporation announced it had signed a purchase and sale agreement with Intergen Global Ventures B.V. pursuant to which Intergen agrees to pay the Corporation US $303.5 in cash million for its Mexican assets.

 

·                  On February 13, 2008, the Corporation announced that, commencing in 2009, it would be constructing a 66 MW wind generation facility in southern Alberta, consisting of 22 Vestas V90 3 MW wind turbines.  The total capital costs for this Blue Trail wind power project is expected to be $115 million.  The capacity from this project is expected to be sold on the spot market.

 

·                  On February 1, 2008, the Board of Directors of the Corporation announced it had approved an increase to the annual dividend to holders of common shares from $1.00 per share to $1.08 per share.

 

Year Ended December 31, 2007

 

·                  During the third quarter, the Corporation completed an uprate on the Sundance Unit 4 facility. A final measurement took place in the fourth quarter of 2007 and the generating capacity added as a result of this uprate was 53 MW.

 

·                  On September 11, 2007, the Corporation announced it had received regulatory approval to increase the number of shares it may purchase under its Normal Course Issuer Bid (“NCIB”) program.  The Corporation may now purchase for cancellation up to 20.2 million shares or approximately 10 per cent of the 202 million common shares issued and outstanding as of April 23, 2007.

 

·                  On July 17, 2007, the Corporation amended the power purchase agreement with New Brunswick Power Distribution and Customer Service Corporation (“New Brunswick Power”) to increase capacity from 75 MW to 96

 

3

 

MW. As a result, total capital costs for the Kent Hills wind power project will also increase by $40 million, from $130 million to $170 million. The Corporation also signed a purchase and sale agreement with Vector Wind Energy, a wholly owned subsidiary of Canadian Hydro Developers Inc., to acquire its Fairfield Hill wind power site, including an option to develop the site at a future date.

 

·                  On June 21, 2007, TransAlta Utilities entered into an agreement with Bucyrus Canada Limited and Bucyrus International Inc. for the purchase of a dragline to be used primarily in the supply of coal for the Keephills 3 joint venture project. The total dragline purchase costs are approximately $150 million, with final payments for goods and services due by May 2010. The total payments made under this agreement in 2007 were $18 million.

 

·                  On February 26, 2007, the Corporation and EPCOR Power Development Corporation (“EPCOR”) announced that they were proceeding with building the 450 MW Keephills 3 power project located approximately 70 kilometres west of Edmonton, Alberta.  The capital cost for the project, including mine capital, is expected to be approximately $1.6 billion.  Through the Keephills 3 Limited Partnership (“K3LP”), an affiliate of the Corporation, TransAlta and EPCOR will be equal partners in the ownership of Keephills 3, with TransAlta Energy responsible for managing the joint venture and EPCOR responsible for the construction.  Upon completion, which is expected at the end of the first quarter in 2011, TransAlta Utilities will operate the facility and EPCOR and TransAlta will independently dispatch and market their share of the unit’s electrical output.  The project has received approval from the Alberta Energy and Utilities Board and from Alberta Environment.

 

·                  On January 19, 2007, the Corporation announced that it had been awarded a 25-year Power Purchase Agreement (“PPA”) to provide 75 MW of wind power to New Brunswick Power.  Under the agreement, TransAlta will construct, own and operate a wind power facility in New Brunswick.  The capital cost of the project is estimated to be $130 million.  The project is subject to regulatory and environmental approvals and is expected to begin commercial operations by the end of 2008. Natural Forces Technologies Inc., an Atlantic Canada based wind developer, is TransAlta’s co-development partner in this project.

 

·                  On January 2, 2007, the Corporation redeemed, at par, all of its outstanding 7.75 per cent preferred securities, with an outstanding principal amount of $175 million.

 

Year ended December 31, 2006

 

·                 On December 18, 2006, TransAlta Utilities assigned its rights in the development agreement it held with EPCOR, governing the joint development of the Keephills 3 power project, to K3LP.  K3LP subsequently sold a 50% undivided interest in the Keephills 3 power project to the EPCOR Power Development (K3) Limited Partnership and has entered into a joint venture agreement governing the continued development of the Keephills 3 power project.  In the event the Keephills 3 power project proceeds to operation, TransAlta Utilities will be the operator of the project pursuant to an operations and maintenance agreement and coal supply agreement.

 

·                 On November 27, 2006, TransAlta announced it would immediately stop mining operations at its Centralia, Washington coal mine.  TransAlta also announced that it had entered into agreements to purchase and transport coal from the Powder River Basin to fuel TransAlta’s Centralia thermal facility.

 

·                 On November 17, 2006, TransAlta Utilities entered into a settlement agreement with Canadian National Railway Company for a portion of outstanding claims for lost margin and incremental expenses relating to the train derailment and resulting oil spill into Lake Wabamun in 2005.  The terms of the settlement are subject to a confidentiality agreement and cannot be disclosed.

 

·                 On February 17, 2006, a wholly-owned subsidiary of TransAlta, together with a subsidiary of Mid-American Energy Company (“Mid-American”), entered into an agreement to purchase a 10 MW hydro facility in Hawaii to be held directly by the Wailuku Holding Company LLC, a company jointly and equally owned by TransAlta and Mid-American.

 

·                 On February 15, 2006, TransAlta announced it had signed a five-year agreement with the Ontario Power Authority (“OPA”) for the supply of electricity from TransAlta’s Sarnia Regional Cogeneration Power Plant.  Under the

 

4

 

terms of the agreement, Transalta will be available to supply an average of 400 MW of electricity to the Ontario electricity market.  The supply contract is effective until December 31, 2010.

 

·                 On February 1, 2006, TransAlta Utilities entered into a development agreement with EPCOR to jointly pursue the Keephills 3 power project.  Keephills 3 is a proposed 450 MW facility adjacent to TransAlta’s existing Keephills facility, approximately 70 kilometres west of Edmonton, Alberta.

 

Year ended December 31, 2005

 

·                 On December 9, 2005, the Corporation announced that its wholly-owned subsidiary, TransAlta Energy Marketing (U.S.) Inc. had entered into an agreement for the sale of generation from the Corporation’s Centralia generating facility for the period from January 1, 2007 to December 31, 2010.  The agreement has a value of approximately US $450 million.

 

·                 On September 12, 2005, the Corporation announced that its 279 MW Wabamun Unit 4 generating facility had resumed full operations on September 11, 2005 following the successful implementation of its return to service plan.  TransAlta was forced to shut down the Wabamun facility on August 3, 2005 due to a train derailment and resulting oil spill into Lake Wabamun, Alberta.  The Wabamun unit was on standby until an appropriate return to service plan was developed and reviewed with regulators and Canadian National Railway Company.  The Corporation estimated operating income was impacted by $15 to $18 million as a result of the Wabamun shutdown.

 

·                 On March 1, 2005, the Corporation announced the completion of the 450 MW Genesee 3 generating facility, a joint venture between the Corporation and EPCOR.  See “Generation Business Segment –Alberta - Thermal facilities”.

 

·                 On February 15, 2005, the Corporation redeemed, at par, all of its outstanding 7.5 per cent and 8.15 per cent preferred securities, with an outstanding principal amount of $175 million and $125 million, respectively.

 

·                 On January 3, 2005, the Corporation announced that it had shut down and retired Units 1 (62 MW) and 2 (57 MW) of its Wabamun facility, effective December 31, 2004.  See “Generation Business Segment - Alberta - Thermal facilities”.

 

5

 

BUSINESS OF TRANSALTA

 

Generation Business Segment

 

The following table summarizes the Corporation’s generation facilities which are operating, under construction or under development, as at January 31, 2008:

 

Region		Facility		Capacity (MW)		Ownership (%)			Net Capacity Ownership Interest		Fuel		Revenue Source		Contract Expiry Date
Canada		Keephills		766		100			766		Coal		Alberta PPA		2020
Alberta		Sheerness		780		25			195		Coal		Alberta PPA		2020
(25 facilities)		Sundance		2,073		100			2,073		Coal		Alberta PPA		2017, 2020
		Wabamun		279		100			279		Coal		Merchant		-
		Fort Saskatchewan		118		30			35		Gas		Long-term contract (“LTC”)		2019
		Meridian		220		25			55		Gas		LTC		2024
		Poplar Creek		356		100			356		Gas		LTC/Merchant		2024
		Genesee 3		450		50			225		Coal		Merchant		-
		Keephills 3 (1)		450		50			225		Coal		Merchant		-
		Hydro assets (2)		801		100			801		Hydro		Alberta PPA		2013-2020
		Summerview(3)		70		100			70		Wind		Merchant		-
		Castle River (4)		46		100			46		Wind		LTC/Merchant		2011
		McBride Lake		76		50			38		Wind		LTC		2024
		Blue Trail (2)		66		100			66		Wind		Merchant		-
		Total Alberta		6,551					5,230
Eastern		Mississauga		108		50			54		Gas		LTC		2017
Canada		Ottawa		68		50			34		Gas		LTC		2012
(5 facilities)		Sarnia		575		100			575		Gas		LTC/Merchant		2022
		Windsor		68		50			34		Gas		LTC/Merchant		2016
		Kent Hills (1)		96		100			96		Wind		PPA		2033
		Total Eastern Canada		915					793
United States		Centralia, WA		1,404		100			1,404		Coal		Merchant		-
(18 facilities)		Centralia Gas		248		100			248		Gas		Merchant		-
		Skookumchuk, WA		1		100			1		Hydro		-		-
		Power Resources, TX		212		50			106		Gas		Merchant		-
		Saranac, NY		240		37	.5		90		Gas		LTC		2009
		Yuma, AZ		50		50			25		Gas		LTC		2024
		Imperial Valley Geothermal Facilities 5(8)		327		50			164		Geothermal		LTC/Merchant		2016-2035
		Wailuku		10		50			5		Hydro		LTC		2023
		Total US		2,492					2,043
Mexico		Campeche		252		100			252		Gas/Diesel		LTC		2028
(2 facilities)		Chihuahua		259		100			259		Gas		LTC		2028
		Total Mexico		511					511
Australia		Parkeston		110		50			55		Gas		LTC		2016
(5 facilities)		Southern Cross (6)		245		100			245		Gas/Diesel		LTC		2016
		Total Australia		355					300
Total				10,824					8,877

 

Notes:

 

(1)	These facilities are currently under development.
(2)	Comprises 13 facilities.
(3)	Comprises 2 facilities.
(4)	Includes 6 individual turbines at other locations.
(5)	Comprises 10 facilities.
(6)	Comprises 4 facilities

 

6

 

Canada:  Alberta

 

Thermal facilities

 

The following table summarizes the Corporation’s western Canadian thermal generation facilities:

 

Location		Plant		Capacity (MW)		Ownership (%)		Commissioning Dates
Wabamun (1)		Wabamun Unit No. 4		279		100		1968
Sundance		Sundance Unit No. 1		280		100		1970
		Sundance Unit No. 2		280		100		1973
		Sundance Unit No. 3		353		100		1976
		Sundance Unit No. 4		406		100		1977
		Sundance Unit No. 5		353		100		1978
		Sundance Unit No. 6		401		100		1980
Keephills		Keephills Unit No. 1		383		100		1983
		Keephills Unit No. 2		383		100		1984
		Keephills Unit No. 3 (2)		450		50		-
Sheerness		Sheerness Unit No. 1		390		25		1986
		Sheerness Unit No. 2		390		25		1990
Genesee		Genesee 3		450		50		2005
Total				4,798

 

Notes:

 

⁽¹⁾        Wabamun unit 4 is expected to be removed from service upon the expiry of its license in 2010.

⁽²⁾        Facility under development.

 

The Keephills, Sundance and Wabamun facilities (the “Alberta thermal plants”) are located approximately 70 kilometres west of Edmonton, Alberta and are owned by the Corporation.  The Sheerness facility is jointly owned by TransAlta Cogeneration, L.P. (“TA Cogen”), an Ontario limited partnership, and ATCO Power (2000) Ltd. (“ATCO Power”). The Genesee facility is jointly owned by the Corporation and EPCOR.  The Corporation completed the sale of its 50 per cent interest in the Sheerness facility to TA Cogen on July 30, 2003.  The Corporation’s thermal plants are generally base load plants, meaning that they are expected to operate for long periods of time at or near their rated capacity.  Availability(1) is an important measure of the economic success of a thermal plant. The weighted equivalent availability factor for the Alberta thermal plants in 2007 was 87.1 per cent compared with 88.7 percent in 2006, 87.6 per cent in 2005 and 86.5 per cent in 2004.  For the Sheerness facility, the weighted equivalent availability factor was 94.4 percent in 2007 compared to 92.2 percent in 2006, 91.0 per cent in 2005 and 90.2 per cent in 2004.  For the Genesee 3 facility, the weighted equivalent availability factor was 92.9 percent in 2007 compared to 96.9 per cent in 2006 and 91.8 per cent in 2005.

 

Fuel requirements for TransAlta’s thermal power facilities are supplied by surface strip coal mines located in close proximity to the facilities.  TransAlta owns two surface mines in Alberta that supply coal to its Alberta thermal plants.  The Whitewood mine supplies the Wabamun plant and the Highvale mine supplies the Sundance and Keephills facilities.  TransAlta estimates that the recoverable coal reserves contained in these mines are potentially sufficient to supply the anticipated requirements for the life of these facilities including possible life extension and plant expansion.

 

Coal for the Sheerness facility is provided from the adjacent Sheerness mine.  The coal reserves of the mine are owned, leased or controlled jointly by TA Cogen, ATCO Power and Prairie Mines & Royalties Limited (“PMRL”).  TA Cogen and ATCO Power have entered into coal supply agreements with PMRL, which operates the mine, to supply coal until 2026.

 

Note:

 

(1)              Availability means the weighted average equivalent availability factor and is defined in the glossary of terms (Appendix B).

 

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Hydroelectric facilities

 

Location		Plant		Capacity (MW)		Ownership (%)		Commissioning Dates
Bow River System		Horseshoe		14		100		1911
		Kananaskis		19		100		1913, 1951
		Ghost		51		100		1929, 1954
		Cascade		36		100		1942, 1957
		Barrier		13		100		1947
		Bearspaw		17		100		1953, 1954
		Pocaterra		15		100		1955
		Interlakes		5		100		1955
		Spray		103		100		1951, 1960
		Three Sisters		3		100		1951
		Rundle		50		100		1951, 1960
North Saskatchewan River System		Brazeau		355		100		1965, 1967
		Bighorn		120		100		1972
Total				801

 

The Corporation’s hydroelectric facilities are primarily peaking plants, meaning they are generally only operated during times of peak demand.

 

Wind Generation Facilities

 

The following table summarizes the Corporation’s wind generation facilities:

 

Location		Plant		Capacity (MW)		Ownership (%)		Commissioning Dates
Fort MacLeod		McBride Lake		76		50		2003
Pincher Creek		Castle River and Other		46		100		1997 – 2001
Pincher Creek		Summerview		70		100		2004
New Brunswick		Kent Hills (1)		96		100		2008
Alberta		Blue Trail (1)		66		100		2009
Total				354

 

Note:

(1)       Facility under development reflects expected capacity and commissioning date.

 

The Corporation owns and operates approximately 154 MW of net capacity (excluding facilities under development) and operates approximately 192 MW of capacity primarily in three wind farms in southwestern Alberta.

 

Castle River is a 42 MW facility comprised of 59 Vestas V47 (660 kW) turbines and 1 Vestas V44 (600 kW) turbine located at Pincher Creek, Alberta.  The facility is 71 per cent contracted primarily to ENMAX Energy Corp. and is the sole Green Energy® provider to the City of Calgary’s “Ride the Wind” Light Rail Transit program.  The Corporation also owns and operates seven additional turbines totalling 4 MW primarily located in the Pincher Creek and Waterton areas of southwestern Alberta.

 

McBride Lake, one of Canada’s largest wind generation facilities, is a 76 MW facility comprised of 114 Vestas V47 (660 kW) turbines located at Fort MacLeod, Alberta.  It was constructed by the Corporation and was completed and producing electricity in the third quarter of 2003.  McBride Lake is operated by the Corporation and is jointly owned with ENMAX Green Power Inc., with each partner owning a 50 per cent interest.  The output from the facility is 100 per cent contracted in the form of a 20-year PPA with ENMAX.  The Corporation is also entitled to receive Wind Power Production Incentive (“WPPI”) payments from the federal government at $12/MWh in respect of the McBride Lake facility until 2013.

 

On October 13, 2004, TransAlta announced the commencement of commercial operations at its $100 million Summerview 68 MW wind farm located approximately 15 kilometres northeast of Pincher Creek, Alberta.  Along with an existing 1.8 MW turbine in the area, the Summerview facility, which comprises 38 x 1.8 MW turbines, brings the total owned wind generation capacity to approximately 152 MW and total operated capacity to approximately 189 MW.  The Summerview

 

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wind farm is a merchant facility but is entitled to receive WPPI payments from the Federal Government at $10/MWh until 2014.

 

On January 19, 2007, the Corporation announced that it had been awarded a 25 year PPA to deliver 75 MW of wind power to New Brunswick Power.  Under the agreement, TransAlta will construct, own and operate a wind power facility in New Brunswick. On July 17, 2007, the Corporation announced it had amended its power purchase agreement with New Brunswick Power from 75 MW to 96 MW bringing the total capital costs for the project to an estimated $170 million.  The project is subject to regulatory and environmental approvals and is expected to begin commercial operations by the end of 2008.  The facility will use 3 MW turbines and once complete, will provide an estimated 280,000 MWh per year of electrical energy.  Natural Forces Technologies Inc. (“Natural Forces”), an Atlantic Canada based wind developer is TransAlta’s co-development partner in this project and Natural Forces has an option to purchase up to 17% of the Kent Hills project within 180 days of its completion.

 

The Corporation also signed a purchase and sale agreement with Vector Wind Energy, a wholly owned subsidiary of Canadian Hydro Developers Inc., for acquisition of its Fairfield Hill wind power site, located in New Brunswick, including the option to develop the site at a future date.

 

On February 13, 2008, the Corporation announced that, commencing in 2009, it would be constructing a 66 MW wind generation facility in southern Alberta, consisting of 22 Vestas V90 3 MW wind turbines.  The total capital costs for this Blue Trail wind power project is expected to be $115 million.  The capacity from this project is expected to be sold on the spot market.

 

All of the electricity generated and sold by the Corporation’s wind division is from generation facilities that are EcoLogo-certified.  The Corporation is an EcoLogo-certified distributor of Alternative Source Electricity through Environment Canada’s Environmental Choice program.  EcoLogo certification is granted to products with environmental performance that meet or exceed all government, industrial safety and performance standards.  The Corporation’s wind facilities constructed after April 2001, also qualify for the Green E and Green Leaf certifications.

 

Alberta PPAs

 

All of the Corporation’s Alberta thermal and hydroelectric facilities, other than the Wabamun and Genesee 3 facilities, operate under Alberta PPAs.  The PPA for the Wabamun plant expired on December 31, 2003.  The Alberta PPAs establish committed capacity and electrical energy generation requirements and availability targets to be achieved by each thermal plant, energy and ancillary services obligations for the hydroelectric plants, and the price at which electricity is to be supplied.  The Corporation bears the risk or retains the benefit of volume variances (except for those arising from events considered to be force majeure, in the case of the thermal plants) and any change in costs (unless due to a change in law) required to maintain and operate the facilities.

 

Under the Alberta PPAs, for the formerly regulated thermal facilities, the Corporation is exposed to electricity price risk if availability declines below contracted levels (other than as a result of outages caused by an event of force majeure).  In such circumstances, the Corporation must pay a penalty for the lost availability based upon a price equal to the 30-day rolling average of Alberta’s market electricity prices.  This rolling average provision attempts to mitigate price spikes that can occur as a result of sudden outages.  The Corporation attempts to further mitigate this exposure by maintaining contracted and uncontracted capacity in the market, through operating and maintenance practices, and through hedging activities.

 

The Corporation’s hydroelectric facilities are not contracted on a facility-by-facility basis; rather, facilities are aggregated in a single Alberta PPA which provides for financial obligations for energy and ancillary services based on hourly targets.  These targeted amounts are met by the Corporation through physical delivery or third party purchases.

 

The Corporation’s compensation under the Alberta PPAs is based on a pricing formula which replaced the cost of service regime that applied previously under utility regulation.  Key elements of the pricing formula are the amount of common equity deemed to form part of the capital structure, the amount of risk premium attributable to deemed common equity and a recovery of fixed and variable costs.  Common equity is deemed to be 45 per cent of total capital and the return on equity is set annually at a 4.5 per cent premium over the rate on a 10-year Government of Canada Bond.

 

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