SYS-CON MEDIA Authors: Gilad Parann-Nissany, Michael Bushong, Eric Brown, Kevin Benedict, PR.com Newswire

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Newalta Reports Fourth Quarter and Year End 2013 Results

CALGARY, ALBERTA -- (Marketwired) -- 02/20/14 -- Newalta Corporation ("Newalta") (TSX: NAL) today reported results for the three months and year ended December 31, 2013.

FINANCIAL HIGHLIGHTS(1)


                       Three months
                              ended                   Year ended
                       December 31,                 December 31,
($000s except per
 share data)                        % Increase                   % Increase
(unaudited)            2013    2012 (Decrease)     2013     2012 (Decrease)
----------------------------------------------------------------------------
Revenue             203,799 198,445          3  783,396  726,209          8
Gross profit         46,095  39,037         18  188,538  169,758         11
- % of revenue           23%     20%        15       24%      23%         4
Net (loss)
 earnings(2)        (10,322)  4,124       (350)  21,940   42,804        (49)
- per share ($) -
 basic                (0.19)   0.08       (338)    0.40     0.86        (53)
- per share ($) -
 diluted              (0.19)   0.08       (338)    0.40     0.85        (53)
Adjusted net
 earnings(3)         11,532   8,947         29   49,596   41,623         19
- per share ($) -
 basic(3)              0.21    0.17         24     0.90     0.84          7
Adjusted EBITDA(3)   32,795  33,290         (1) 150,064  142,136          6
- per share ($)(3)     0.59    0.63         (7)    2.73     2.86         (5)
Cash from operating
 activities          45,616  47,462         (4) 123,574   97,443         27
- per share ($)        0.83    0.90         (8)    2.25     1.96         15
Funds from
 operations(3)       19,846  22,303        (11) 120,528  116,616          3
- per share ($)(3)     0.36    0.42        (14)    2.19     2.35         (7)
Maintenance capital
 expenditures(3)     14,432  12,089         19   29,679   34,952        (15)
Growth capital
 expenditures(3)     57,786  45,311         28  141,461  137,388          3
Dividends declared    6,087   5,424         12   23,671   18,918         25
- per share ($)(3)     0.11    0.10         10     0.43     0.38         13
Dividends paid        4,862   4,870          -   17,799   17,382          2
Book value per
 share, December 31,                              12.20    11.82          3
Weighted average
 shares outstanding  55,205  52,741          5   54,938   49,690         11
Shares outstanding,
 December 31,(4)     55,336  54,263          2   55,336   54,263          2
----------------------------------------------------------------------------

1.  Management's Discussion and Analysis and Newalta's unaudited
    Consolidated Financial Statements and notes are attached. References to
    Generally Accepted Accounting Principles ("GAAP") are synonymous with
    IFRS and references to unaudited Consolidated Financial Statements are
    synonymous with Financial Statements.
2.  Recognized approximately $21.2 million in non-cash restructuring related
    impairment in Q4 2013 and 2013 as a result of the rationalization
    initiatives announced in December 2013.
3.  These financial measures do not have any standardized meaning prescribed
    by GAAP and are therefore unlikely to be comparable to similar measures
    presented by other issuers. Non-GAAP financial measures are identified
    and defined throughout the attached Management's Discussion and
    Analysis.
4.  Newalta has 55,452,192 shares outstanding as at February 20, 2014.

Management Commentary

"Our start to the year was weak, weighed down by reduced market demand and lower prices for our products, however, performance improved as the year progressed," said Al Cadotte, President and CEO of Newalta. "In the final three quarters of 2013, before non-recurring items Adjusted EBITDA grew by 20 percent over the prior year. The last three quarters are indicative of the results we expect from our business plan.

"In the fourth quarter, improved performance across all of our operations was offset by non-recurring charges of about $4.5 million. For the year, Adjusted EBITDA excluding non-recurring charges, was $156.0 million, up 10 percent compared to 2012.

We continued to advance our growth plans in 2013 with several notable achievements:


--  We increased our long-term onsite contract revenue base to 14 percent of
    revenue in 2013, up from 10 percent in 2012.

--  We commissioned our first U.S. satellite facility mid-year and we
    constructed two more that will be operational in Q1 of 2014.

--  Our mature fine tailings ("MFT") project with Syncrude Canada Ltd.
    exceeded expectations with operations starting up in May 2013 and
    continuing through to the end of the year. We also constructed and
    commissioned our Shell Canada Ltd. MFT contract on budget and on
    schedule.

--  We commissioned one satellite facility at mid-year in our Oilfield
    Division and constructed two more for commissioning in Q1 of 2014.

--  We signed a development agreement with DuPont Canada to demonstrate a
    new wastewater process. Construction is now complete and the unit will
    be operational in early 2014.

--  We increased our quarterly dividend 10 percent compared to last year.

--  Late in the year, we began a comprehensive review of our Industrial
    Division with actions planned predominately in the first quarter of 2014
    to drive improved profitability and higher investment returns.

"The improvements we are making to the profitability of the Industrial Division, and the reductions we will achieve in SG&A costs combined with the contributions from our 2013 growth capital investments will all contribute to much improved results in 2014. We expect a strong start to the year with first quarter performance well ahead of last year. This will set the stage for a strong year of growth, profitability and attractive shareholder returns."

Consolidated Overview

Fourth quarter revenue and Adjusted EBITDA were relatively flat compared to prior year. Contributions from all divisions increased; however, gains were offset by non-recurring charges of approximately $4.5 million. Net loss in the quarter was $10.3 million, compared to net earnings of $4.1 million in the prior year. Higher Divisional EBITDA and lower net finance charges were more than offset by non-cash restructuring related impairment charges. In Q4 2013, we recognized $21.2 million for impairment of certain assets related to the planned facility closures and divestitures in the Industrial division.

2013 revenue increased 8% to $783.4 million compared to prior year while Adjusted EBITDA was $150.1 million. Adjusted EBITDA before non-recurring charges was $156.0 million, up 10% over 2012. Improved performance was primarily driven by contributions from New Markets and Oilfield. 2013 net earnings was $21.9 million, down 49% from 2012 due primarily to the non-cash restructuring related impairment.

The non-recurring charges in the quarter and 2013 were $4.5 million and $5.9 million, respectively. Non-recurring charges included: charges for positions eliminated during the year; the settlement of an out of period disputed account; and U.S. employee compensation for previous periods as a result of a U.S. Federal Department of Labor ("DOL") settlement.

In 2013, the DOL reviewed our compensation structure for a misclassification of certain operating employees under the applicable labour standards. Our compensation package for U.S. employees was consistent with our Canadian pay structure. As a result of the DOL review, in Q4 2013, we entered into a settlement agreement and recognized $4.2 million for U.S. employee compensation:


--  $2.2 million was charged to SG&A for compensation related to prior
    years; and

--  $2.0 million was charged to New Markets for compensation related to
    2013, including $0.5 million related to Q4 2013.

Other Highlights

Newalta's Board of Directors declared a fourth quarter dividend of $0.11 per share ($0.44 per share annualized) paid January 15, 2014 to shareholders of record on December 31, 2013.

Capital expenditures for the three months and year ended December 31, 2013, were $72.2 million and $171.1 million, respectively, focused primarily on growth capital projects in New Markets and Oilfield.

Reflecting the ongoing strength of our pipeline of capital projects and organic growth opportunities, particularly in New Markets and Oilfield, our 2014 capital budget is $180 million, with growth capital and maintenance expenditures of $145 million and $35 million, respectively. We will continue to invest in New Markets and Oilfield to drive strong returns and growth in our core growth areas. The capital program will be funded primarily by funds from operations. We expect to spend approximately 40% of the capital budget in the first half of 2014.

In early 2014, we formed an alliance with Halliburton Canada to offer tailored onsite services, specializing in drilling fluids and waste management services.

Recent Developments

In December, we announced a comprehensive review to improve productivity and profitability, particularly in the Industrial Division and in SG&A expenses across the organization.

We have developed a plan focused on rationalizing our Eastern Industrial operations and related overhead. The plan includes redirecting lines of business, consolidations, closures and divestitures of certain facilities, as well as overhead reductions related to supporting impacted operations. We will execute the plan throughout 2014, and expect to implement the bulk of the plan in the first half of the year. Once implemented, we expect approximately $10 million in annualized ongoing cash savings and approximately $5 million in one-time cash restructuring costs. To date, we have taken actions that will deliver 60 percent of the identified savings, including closure of three facilities in eastern Canada and overhead reductions in associated support functions.

With respect to SG&A, we are assessing our current cost structure to align resources with business needs, anticipating incremental cost savings to those identified under the industrial plan above.

We continue to assess our cost structure across all business lines and further actions may be implemented. We will assess and update savings and cost estimates throughout the year.

Amendment to By-laws

In addition, today the Board of Directors approved an amendment to the by-laws of Newalta that requires shareholders to give advanced notice to Newalta of any proposal to nominate directors for election to the Board of Directors in circumstances where nominations are made other than by requisitioning a meeting or making a shareholder proposal, each pursuant to the provisions of the Business Corporations Act (Alberta). The amendment to the by-laws is effective immediately. Shareholders will be asked to confirm and ratify the amended by-laws at the next annual and special meeting of shareholders to be held on May 7, 2014. A copy of the amended by-laws is available on SEDAR at www.sedar.com.

Quarterly Conference Call

Management will hold a conference call on Friday, February 21, 2014 at 11:00 a.m. (ET) to discuss Newalta's performance for the quarter and year ended December 31, 2013. To participate in the teleconference, please call 416-340-8530, or 800-766-6630. To access the simultaneous webcast, please visit www.newalta.com. For those unable to listen to the live call, a taped broadcast will be available at www.newalta.com and, until midnight on Friday, February 28, 2014 by dialing 800-408-3053 and entering passcode 4008419 followed by the pound sign.

About Newalta

Newalta is North America's leading provider of innovative, engineered environmental solutions that enable customers to reduce disposal, enhance recycling and recover valuable resources from industrial residues. We serve customers onsite directly at their operations and through a network of 85 locations in Canada and the U.S. Our proven processes, portfolio of more than 250 operating permits and excellent record of safety make us the first choice provider of sustainability enhancing services to oil, natural gas, petrochemical, refining, lead, manufacturing and mining markets. With a skilled team of more than 2,200 people, two decade track record of profitable expansion and commitment to commercializing new solutions, Newalta is positioned for sustained future growth and improvement. Newalta trades on the TSX as NAL. For more information, visit www.newalta.com.

The press release contains certain statements that constitute forward-looking information. Please refer to the attached Management's Discussion and Analysis for further discussion of assumptions and risks relating to this forward looking information.

NEWALTA CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

Three months and year ended December 31, 2013 and 2012

Certain statements contained in this document constitute "forward-looking information". When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "potential", "strategy", "target", and similar expressions, as they relate to Newalta Corporation and the subsidiaries of Newalta Corporation, or their management, are intended to identify forward-looking information. In particular, forward-looking information included or incorporated by reference in this document include statements with respect to:


--  future operating and financial results;
--  business prospects and strategy including related timelines;
--  capital expenditure programs and other expenditures;
--  realization of anticipated benefits of growth capital investments,
    acquisitions and our technical development initiatives;
--  anticipated industry activity levels;
--  expected demand for our services;
--  the amount of dividends declared or payable in the future;
--  our projected cost structure; and
--  expectations and implications of changes in legislation.

Our strategic objectives for the Business Plan period 2014 to 2017, including anticipated growth capital investments and our action plan for 2014 and 2015, are set out under "Strategy". Expected future financial and operating performance based on the results of our strategy, and related assumptions, are set out under "Outlook". Restructuring plans and impacts of implementation are set out under "Recent Developments. Capital budget and divisional allocation is set out under "Capital Expenditures".

Such information reflects our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, without limitation:


--  general market conditions of the industries we service;
--  strength of the oil and gas industry, including drilling activity;
--  fluctuations in commodity prices for oil and the price we received for
    our recovered oil;
--  fluctuations in commodity prices for lead including the price
    differential we pay for lead feedstock and the price we receive for our
    lead products;
--  fluctuations in base oil prices including the price differential we pay
    for used oil and the price we receive for our finished lube oil
    products;
--  fluctuations in interest rates and exchange rates;
--  supply of waste lead acid batteries as feedstock to support direct lead
    sales;
--  demand for our finished lead products by the battery manufacturing
    industry;
--  our ability to secure future capital to support and develop our
    business, including the issuance of additional common shares;
--  the highly regulated nature of the environmental services and waste
    management business in which we operate;
--  dependence on our senior management team and other operations management
    personnel with waste industry experience;
--  the competitive environment of our industry in Canada and the U.S.;
--  success of our growth, acquisition and technical development strategies
    including integration of businesses and processes into our operations
    and potential liabilities from acquisitions;
--  potential operational and safety risks and hazards, obtaining insurance
    for such risks and hazards on reasonable financial terms, and potential
    failure of meeting customer safety standards;
--  the seasonal nature of our operations;
--  costs associated with operating our landfills and reliance on third
    party waste volumes;
--  risk of pending and future legal proceedings;
--  risk to our reputation;
--  our ability to attract, retain, and integrate skilled employees and
    maintain positive labour union relationships;
--  open access for new industry entrants and the general unprotected nature
    of technology used in the waste industry;
--  possible volatility of the price of, and the market for, our common
    shares, and potential dilution for shareholders in the event of a sale
    of additional shares;
--  financial covenants in our debt agreements that may restrict our ability
    to engage in transactions or to obtain additional financing; and
--  such other risks or factors described from time to time in reports we
    file with securities regulatory authorities.

By their nature, forward-looking information involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking information will not occur. Many other factors could also cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking information and readers are cautioned that the foregoing list of factors is not exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Furthermore, the forward-looking information contained in this document are made as of the date of this document and are expressly qualified by this cautionary statement. Unless otherwise required by law, we do not intend, or assume any obligation, to update this forward-looking information.

RECONCILIATION OF NON-GAAP MEASURES

This Management's Discussion and Analysis ("MD&A") contains references to certain financial measures, including some that do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or "GAAP") and may not be comparable to similar measures presented by other corporations or entities. These financial measures are identified and defined below:

"EBITDA", "EBITDA per share", "Adjusted EBITDA", and "Adjusted EBITDA per share" are measures of our operating profitability. EBITDA provides an indication of the results generated by our principal business activities prior to how these activities are financed, assets are amortized or impaired, or how the results are taxed in various jurisdictions. In addition, Adjusted EBITDA provides an indication of the results generated by our principal business activities prior to recognizing stock-based compensation. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our common shares. As such, Adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time. EBITDA and Adjusted EBITDA are derived from the consolidated statements of operations and comprehensive income. EBITDA per share and Adjusted EBITDA per share are derived by dividing EBITDA and Adjusted EBITDA by the basic weighted average number of shares.

They are calculated as follows:


                                      Three months ended          Year ended
                                            December 31,        December 31,
($000s)                                  2013       2012      2013      2012
----------------------------------------------------------------------------
Net (loss) earnings                   (10,322)     4,124    21,940    42,804
Add back:
  Income taxes                         (2,690)       706     5,954    11,208
  Net finance expense                   3,863      5,238    24,481    13,357
  Amortization                         16,684     17,797    66,997    62,509
  Restructuring related impairment     21,198          -    21,198         -
----------------------------------------------------------------------------
EBITDA                                 28,733     27,865   140,570   129,878
----------------------------------------------------------------------------
Add back:
  Stock-based compensation expense      4,062      5,425     9,494    12,258
----------------------------------------------------------------------------
Adjusted EBITDA                        32,795     33,290   150,064   142,136
----------------------------------------------------------------------------
Weighted average number of shares      55,205     52,741    54,938    49,690
----------------------------------------------------------------------------
EBITDA per share                         0.52       0.53      2.56      2.61
----------------------------------------------------------------------------
Adjusted EBITDA per share                0.59       0.63      2.73      2.86
----------------------------------------------------------------------------

"Divisional EBITDA" provides an indication of the results generated by the division's principal business activities prior to how the assets are amortized, and before allocation of Selling, general and administrative costs ("SG&A"). Divisional EBITDA is the sum of gross profit and amortization for the respective division. Divisional EBITDA is derived from Gross Profit as follows:


                                   Three months ended            Year ended
                                         December 31,          December 31,
($000s)                               2013       2012       2013       2012
----------------------------------------------------------------------------
Gross Profit                        46,095     39,037    188,538    169,758
Add back:
  Amortization included in cost
   of sales                         12,711     14,271     52,259     49,024
----------------------------------------------------------------------------
Divisional EBITDA                   58,806     53,308    240,797    218,782
----------------------------------------------------------------------------
  New Markets                       23,321     21,461     93,366     80,015
  Oilfield                          20,199     17,907     82,122     73,482
  Industrial                        15,286     13,940     65,309     65,285
Deduct:
  SG&A(1)                          (30,073)   (25,443)  (100,227)   (88,904)
----------------------------------------------------------------------------
EBITDA                              28,733     27,865    140,570    129,878
----------------------------------------------------------------------------

1.  SG&A excludes amortization of $3,973 and $14,738 for Q4 2013 and 2013,
    respectively, and $3,526 and $13,485 for Q4 2012 and 2012, respectively.

"Adjusted net earnings" and "Adjusted net earnings per share" are measures of our profitability. Adjusted net earnings provides an indication of the results generated by our principal business activities prior to recognizing stock-based compensation recovery or expense, the gain or loss on embedded derivatives and restructuring related charges. Stock-based compensation expense, a component of employee remuneration, can vary significantly with changes in the price of our common shares. The gain on the embedded derivative is a result of the change in the trading price of the debentures and the volatility of the applicable bond market. Restructuring related charges are related to initiatives outside of our normal course of business. As such, Adjusted net earnings provides improved continuity with respect to the comparison of our results over a period of time. Adjusted net earnings per share is derived by dividing Adjusted net earnings by the basic weighted average number of shares.


                                     Three months ended          Year ended
                                           December 31,        December 31,
($000s)                                  2013      2012      2013      2012
----------------------------------------------------------------------------
Net (loss) earnings                   (10,322)    4,124    21,940    42,804
Add back (deduct):
  Stock-based compensation expense      4,062     5,425     9,494    12,258
  Embedded derivative (gain)           (3,406)     (602)   (3,036)  (13,439)
  Restructuring related impairment     21,198         -    21,198         -
----------------------------------------------------------------------------
Adjusted net earnings                  11,532     8,947    49,596    41,623
----------------------------------------------------------------------------
Weighted average number of shares      55,205    52,741    54,938    49,690
----------------------------------------------------------------------------
Adjusted net earnings per share          0.21      0.17      0.90      0.84
----------------------------------------------------------------------------

"Book value per share" is used to assist management and investors in evaluating the book value compared to the market value.


                                                     Year ended December 31,
($000s)                                                     2013        2012
----------------------------------------------------------------------------
Total Equity                                             675,162     641,440
Shares outstanding, December 31,                          55,336      54,263
----------------------------------------------------------------------------
Book value per share                                       12.20       11.82
----------------------------------------------------------------------------

"Cash Basis Return on Capital" ("ROC - Cash") is used to assist management and investors in measuring the returns realized at the consolidated level from capital employed. ROC - Cash is derived from Adjusted EBITDA less cash stock-based compensation, cash taxes and maintenance capital divided by Net Assets. Net Assets is an average of the beginning and ending balances of our total assets less current liabilities for the period.

"Divisional Return on Capital" is used to assist management and investors in measuring the returns realized at the Divisional level from capital employed. It is derived from Divisional EBITDA divided by the average of the beginning and ending balances of assets employed for the period.

"Funds from operations" is used to assist management and investors in analyzing cash flow and leverage. Funds from operations as presented is not intended to represent operating funds from operations or operating profits for the period, nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. Funds from operations is derived from the consolidated statements of cash flows and is calculated as follows:


                                      Three months ended          Year ended
                                            December 31,        December 31,
($000s)                                   2013      2012      2013      2012
----------------------------------------------------------------------------
Cash from Operating Activities          45,616    47,462   123,574    97,443
Add back (deduct) :
  (Decrease) increase in non-cash
   working capital                     (27,078)  (26,842)   (8,333)   15,619
  Decommissioning obligations
   incurred                              1,308     1,683     5,287     3,554
----------------------------------------------------------------------------
Funds from operations                   19,846    22,303   120,528   116,616
----------------------------------------------------------------------------
Weighted average number of shares       55,205    52,741    54,938    49,690
----------------------------------------------------------------------------
Funds from operations per share           0.36      0.42      2.19      2.35
----------------------------------------------------------------------------

References to EBITDA, EBITDA per share, Adjusted EBITDA, Adjusted EBITDA per share, Divisional EBITDA, Adjusted net earnings, Adjusted net earnings per share, ROC - Cash, Divisional Return on Capital, Funds from operations and Funds from operations per share throughout this document have the meanings set out above. Adjusted SG&A has the meaning described in the section titled "Corporate and Other".

The following discussion and analysis should be read in conjunction with (i) the unaudited consolidated financial statements of Newalta, and the notes thereto ("Financial Statements"), for the three months and year ended December 31, 2012 and 2013, (ii) the Financial Statements of Newalta and notes thereto and MD&A of Newalta for the year ended December 31, 2012 and 2011, (iii) the most recently filed Annual Information Form of Newalta and (iv) the unaudited condensed consolidated interim financial statements of Newalta and the notes thereto and MD&A for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013. This information is available at SEDAR (www.sedar.com). Information for the three months and year ended December 31, 2013 along with comparative information for 2012, is provided.

This MD&A is dated February 20, 2014, and takes into consideration information available up to that date. Throughout this document, unless otherwise stated, all currency is stated in Canadian dollars, and MT is defined as "tonnes" or "metric tons".

SELECTED ANNUAL FINANCIAL INFORMATION(1)


($000s except per share data)                  2013        2012        2011
----------------------------------------------------------------------------
Revenue                                     783,396     726,209     682,828
Gross Profit                                188,538     169,758     165,509
- % of revenue                                   24%         23%         24%
Net earnings(2)                              21,940      42,804      33,562
- per share ($) - basic                        0.40        0.86        0.69
- per share ($) - diluted                      0.40        0.85        0.68
Adjusted net earnings(3)                     49,596      41,623      41,241
- per share ($) - basic adjusted(3)            0.90        0.84        0.85
Adjusted EBITDA(3)                          150,064     142,136     146,475
- per share ($)(3)                             2.73        2.86        3.02
Cash from operating activities              123,574      97,443     104,563
- per share ($)                                2.25        1.96        2.15
Funds from operations(3)                    120,528     116,616     122,775
- per share ($)(3)                             2.19        2.35        2.53
Dividends declared                           23,671      18,918      14,818
- per share ($)(3)                             0.43        0.38        0.31
Dividends paid                               17,799      17,382      14,082
Total Assets                              1,408,241   1,318,758   1,165,021
Maintenance capital expenditures(3)          29,679      34,952      31,051
Growth capital expenditures(3)              141,461     137,388      86,629
Senior long-term debt - net of issue
 costs                                      117,136      76,500      68,493
Senior unsecured debentures(4) -
 principal amount                           250,000     250,000     250,000
Weighted average shares outstanding          54,938      49,690      48,569
Shares outstanding, December 31, (5)         55,336      54,263      48,607
----------------------------------------------------------------------------

1.  Management's Discussion and Analysis and Newalta's unaudited
    Consolidated Financial Statements and notes are attached. References to
    Generally Accepted Accounting Principles ("GAAP") are synonymous with
    IFRS and references to unaudited Consolidated Financial Statements and
    notes are synonymous with Financial Statements.
2.  Recognized approximately $21.2 million in non-cash restructuring related
    impairment in 2013 as a result of the rationalization initiatives
    announced in December 2013.
3.  These financial measures do not have any standardized meaning prescribed
    by GAAP and are therefore unlikely to be comparable to similar measures
    presented by other issuers. Non-GAAP financial measures are identified
    and defined throughout the attached Management's Discussion and
    Analysis.
4.  Includes Series 1 and Series 2 Senior Unsecured Debentures ("Senior
    Unsecured Debentures").
5.  Newalta has 55,452,192 shares outstanding as at February 20, 2014.

NEWALTA - WHO WE ARE

Newalta is North America's leading provider of innovative, engineered environmental solutions that enable customers to reduce disposal, enhance recycling and recover valuable resources from industrial residues. We serve customers onsite directly at their operations and through a network of 85 locations in Canada and the U.S. Our proven processes, portfolio of more than 250 operating permits and excellent record of safety make us the first choice provider of sustainability enhancing services to oil, natural gas, petrochemical, refining, lead, manufacturing and mining markets. With a skilled team of more than 2,200 people, a two decade track record of profitable expansion and commitment to commercializing new solutions, Newalta is positioned for sustained future growth and improvement.

The following section contains forward looking information as it outlines our strategic focus for our business plan. Our business plan is based on several key assumptions including growth capital contributions, commodity prices and activity levels of the industries we serve. Changes to these assumptions could cause our actual results to differ materially from the plan outlined below. Please refer to the Sensitivities section for a summary of the key metrics used to derive our plan and the Capital Expenditures section for an understanding of our expected returns from growth capital projects.

STRATEGY:

As we enter 2014, we continue to focus on maximizing shareholder returns through low risk growth investments that provide the highest returns and stable cash flows and on improving operational fitness to maximize the profitability of our core operations. In line with this focus and as part of our business planning process, we have revised our growth capital plan over the plan period and expect to spend approximately $150 to $200 million in growth capital each year. Our growth capital investments will drive strong performance and attractive returns in the years ahead. Over the plan period to 2017, we expect a 15% and 20% compound annual growth rate ("CAGR") for revenue and Adjusted EBITDA, respectively. We will continue to increase contracts as a percentage of revenue to be in excess of 20% by the end of the plan. Adjusted SG&A will improve towards 8% of annual revenue by the end of 2017 and we will continue to work towards a debt leverage ratio of 2.0.

Our key priorities for 2014 and 2015 are:


--  Invest in low-risk, high-return organic growth opportunities to grow the
    business;

    --  Drive expansion in New Markets and Oilfield;

--  Improve returns on existing assets through streamlining and
    consolidation initiatives;

    --  Drive cost alignment particularly in the Industrial division and in
        SG&A expenses;

--  Continue to develop and attract people in line with our talent retention
    focus;

    --  Leverage the organizational structure put in place in 2013 to
        optimize execution of the business plan.

The table below sets out our strategic objectives through to 2017, our tactics, progress in 2013 and action plan for 2014 and 2015.


----------------------------------------------------------------------------

Strategic
Objectives Through                                        Action Plan
2017                Tactics            Progress in 2013   (2014 - 2015)
----------------------------------------------------------------------------
New Markets         Transition onsite  Total contract     With 10 to 15
                    project work to    revenue across all potential
Invest              longer term        three divisions    contracts in the
approximately 60%   contract           grew to 14% of     scoping and
of annual growth    arrangements, to   Newalta revenue    proposal stage at
capital in Canada   grow stable        from 10% in 2012.  any given time, we
and U.S. and        revenue base, with                    will continue to
average 20% revenue no impact from     New Markets        grow total
growth per year,    commodities.       contracts          contracts as a
while maintaining                      represented 46% of percentage of
pacesetter          Extend and grow    total New Markets  Newalta revenue to
Divisional ROC.     existing           revenue, up from   be in excess of
                    contracts.         37% in 2012.       20% by the end of
                                                          the plan.
                                       Awarded $20
                                       million contract   Introduce
                                       with Shell Canada  innovative proven
                                       Limited ("Shell")  technologies
                                       to process mature  including the
                                       fine tailings      collaboration with
                                       ("MFT") at Shell's DuPont for water
                                       Jackpine Mine.     processing.

                                       Successfully
                                       constructed and
                                       commissioned Shell
                                       MFT site.
                    --------------------------------------------------------
                    Apply our          Established three  Establish three
                    successful western new satellite      additional U.S.
                    Canadian model to  facilities.        operating
                    expand our                            locations each
                    presence in U.S.   Restructured Drill year in oil rich
                    markets.           site late in the   plays.
                                       year to position
                                       U.S. for growth in Leverage drill
                                       2014.              site service
                                                          capabilities and
                                       Opened new U.S.    customer
                                       headquarters in    relationships to
                                       Denver, Colorado.  drive longer term
                                                          contract work.

                                                          Expand water
                                                          recycling services
                                                          consistent with
                                                          demand in active
                                                          plays.
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Oilfield            Expand facility    Established three  Establish two
                    network to take    new satellite      additional
Invest              advantage of       facilities.        Oilfield
approximately 30%   growth in existing                    satellites each
of annual growth    markets and new    Commissioned new   year to expand
capital in organic  opportunities.     thermal solids     market presence in
growth projects and                    management         western Canada.
average 15% revenue                    technology at an
growth per year.                       Oilfield facility. Introduce proven
                                                          technologies
                                                          within operations.
                    --------------------------------------------------------
                    Focus on           Oilfield           Develop new
                    productivity       Divisional EBITDA  products and
                    improvements to    as a percent of    services at
                    drive incremental  revenue improved   existing
                    cash flow from     from 41% in 2012   facilities to meet
                    existing assets.   to 44% driven by   changing market
                                       growth capital     demands.
                                       investments.
                    --------------------------------------------------------
                    Increase market    Developed strategy Leverage
                    share in onsite    to offer onsite    experience gained
                    services.          services for waste in Heavy Oil to
                                       management.        implement strategy
                                                          to expand onsite
                                       Developed strategy services for both
                                       and identified     oil and natural
                                       strategic partner  gas basins.
                                       to recover market
                                       share after        Execute strategy
                                       experiencing a     to recover drill
                                       decline in drill   site market share.
                                       site equipment     Leverage newly
                                       utilization.       formed strategic
                                                          alliance with
                                                          Halliburton Canada
                                                          to offer
                                                          integrated onsite
                                                          solution for
                                                          fluids and waste
                                                          management in
                                                          WCSB.
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Industrial          Focus on           Initiated a        Execute
                    productivity       comprehensive      rationalization
Invest              improvements to    review with a      plan to improve
approximately 10%   drive incremental  focus on improving returns.
of annual growth    cash flow from     returns with plans
capital in organic  existing assets.   to streamline,     Introduce proven
growth projects and                    realign resources, technologies
drive improved                         and rationalize    within operations.
returns.                               business lines and
                                       facilities.

                                       Implemented
                                       several
                                       initiatives that
                                       improved
                                       production output
                                       and reduced costs.

                                       Expanded services
                                       in Atlantic region
                                       to process
                                       offshore drilling
                                       waste.

                                       Deferred expansion
                                       of the North
                                       Vancouver facility
                                       until economics
                                       improve.
                    --------------------------------------------------------
                    Increase market    Industrial onsite  Leverage our
                    share in onsite    profit             onsite model and
                    services in        contributions      facility network
                    multiple industry  doubled from 2012. to gain market
                    segments.                             share and
                                       Established new    increased
                                       operating location contributions.
                                       in western Canada
                                       as a base for
                                       onsite operations.
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Process             Evaluate           Announced          Integrate
Commercialization   technologies for   development        initiatives within
                    commercial         agreement with     divisions so as to
Invest growth       application.       DuPont Canada to   expedite processes
capital in new                         test an innovative and returns.
processes.                             water processing
                                       technology in the
                                       Alberta oil and
                                       gas industry.
                    --------------------------------------
                    Leverage facility  Transitioned
                    network to         thermal solids
                    expedite           management
                    commercialization. technology and
                                       waste water
                                       oxidation process
                                       from demonstration
                                       phase to
                                       commercial
                                       operations.
----------------------------------------------------------------------------

RISKS TO OUR STRATEGY

While we remain optimistic about our long-term outlook, we are subject to a number of risks and uncertainties in carrying out our activities. See the Risk Management section for further discussion on our Risk Management program. A complete list of our risk factors is disclosed in our most recently filed Annual Information Form.


----------------------------------------------------------------------------
Risk                                   Mitigation
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Market activity is lower than          - Improve productivity.
anticipated
                                       - Develop new technologies that make
Lower market activity can translate    our processes more effective and cost
into reduced waste volumes and weaker  efficient.
commodity prices, impacting returns
on existing assets and our capacity    - Grow onsite contract revenue to
to invest in organic growth capital.   mitigate exposure to commodity
                                       prices.

                                       - Maintain debt leverage to provide
                                       adequate financial flexibility.

                                       - Utilize, as needed, proven
                                       defensive toolkit to manage costs and
                                       capital expenditures.
----------------------------------------------------------------------------
Safety record                          - Since 1993, safety has been
                                       established as one of our core
Failure to meet customer safety        values.
standards while working on customer
sites or at our facilities could       - Long standing history of safety
result in limitations in our ability   excellence.
to maintain and secure new contracts.
                                       - Our Environmental, Health and
                                       Safety ("EH&S") team works with
                                       operators, customers and regulators
                                       to ensure that we foster a culture of
                                       safety and prevention to ensure we
                                       maintain our strong record.

                                       - Designs for facilities and onsite
                                       equipment are subject to strict
                                       hazards and operability studies and
                                       engineering practices.
----------------------------------------------------------------------------
Competition                            - We are well established in the
                                       industry with an excellent safety
Competition can come from generators   record and employee training.
of waste processing streams
internally or new third party waste    - We have a strong customer focused
processors entering the market.        approach and service differentiation
                                       to secure Newalta brand loyalty
                                       across all business lines.

                                       - Barriers to entry include facility
                                       network and infrastructure as well as
                                       regulatory permits.

                                       - Our facilities are optimally
                                       located near the point of waste
                                       generation and our network provides
                                       our customers with a backstop for
                                       process guarantees to better serve
                                       their needs.

                                       - Our onsite services are targeted to
                                       facilitate customers managing their
                                       waste onsite.
----------------------------------------------------------------------------
Changes in environmental regulations   - Generally, we have a positive bias
                                       to changes in environmental
Changes in environmental regulations   regulations as they provide
also impact our business.              opportunities for service expansion.

                                       - We are actively engaged in the
                                       review of forthcoming legislation to
                                       ensure that our operations can adapt
                                       as needed and to ensure that we are
                                       prepared to capitalize on
                                       opportunities as they arise.
----------------------------------------------------------------------------
Failure to commercialize identified    - We have a staged approach for
technologies into our processes        developing technologies, which
                                       differentiates between proven and
Failure to commercialize new           unproven technologies and ensures
technologies could reduce our          resources can be redeployed
competitiveness.                       efficiently to other initiatives.

                                       - Other initiatives include expansion
                                       of services and business development.

                                       - Performance from our current assets
                                       employed is not contingent on the
                                       commercialization of the identified
                                       technologies.
----------------------------------------------------------------------------
Organizational capabilities            - Develop our people through talent
                                       development programs which include
Failure to effectively recruit,        customized leadership training and
retain and integrate top talent in     comprehensive on-boarding.
period of growth could negatively
impact our ability to meet our long-   - Engage new employees in EH&S
term targets.                          training programs and Safety
                                       Leadership programs.

                                       - Use of cross-functional training
                                       and teams to promote integration.
----------------------------------------------------------------------------

CORPORATE OVERVIEW

Strong contributions from all divisions in the fourth quarter were partially offset by non-recurring charges of approximately $4.5 million. Fourth quarter revenue was $203.8 million and Adjusted EBITDA was $32.8 million, relatively flat compared to prior year. Net loss in the quarter was $10.3 million, compared to net earnings of $4.1 million in the prior year. Higher Divisional EBITDA and lower net finance charges were more than offset by non-cash restructuring related impairment charges. In Q4 2013, we recognized $21.2 million for impairment of certain assets related to planned facility closures and divestitures in the Industrial division.

We expected Adjusted EBITDA in the second half of 2013 to be approximately 20% higher than for the same period last year, based on commodity prices and drilling activity remaining at Q3 levels. Commodity prices were significantly lower in Q4 than in Q3 and results were also impacted by non-recurring charges. Adjusting for these factors, Adjusted EBITDA for the second half of 2013 was up in excess of 20% over prior year, in line with management expectations.

2013 revenue increased 8% to $783.4 million compared to prior year while Adjusted EBITDA was $150.1 million. Adjusted EBITDA, before non-recurring charges, was $156.0 million, up 10%, over 2012. This improvement was primarily driven by contributions from New Markets and Oilfield. Revenue from contracts (fee for service solutions with terms longer than one year and no direct commodity price exposure) generated 14% of annual consolidated revenue, compared to 10% in 2012. This improvement was largely driven by our Heavy Oil contracts. 2013 net earnings was $21.9 million, down 49% from 2012 due primarily to the non-cash restructuring related impairment.

The non-recurring charges in the quarter and 2013 were $4.5 million and $5.9 million, respectively. Non-recurring charges included: charges for positions eliminated during the year; the settlement of an out of period disputed account; and U.S. employee compensation for previous periods as a result of a U.S. Federal Department of Labor ("DOL") settlement.

In 2013, the DOL reviewed our compensation structure for a misclassification of certain operating employees under the applicable labour standards. Our compensation package for U.S. employees was consistent with our Canadian pay structure. As a result of the DOL review, in Q4 2013, we entered into a settlement agreement and recognized $4.2 million for U.S. employee compensation:


--  $2.2 million was charged to SG&A for compensation related to prior
    years; and

--  $2.0 million was charged to New Markets for compensation related to
    2013, including $0.5 million related to Q4 2013.

New Markets revenue and gross profit in the quarter increased 19% and 4%, respectively, to $62.5 million and $17.7 million compared to prior year. Improved performance in the quarter was driven by growth in Heavy Oil. For the year, revenue and gross profit from New Markets increased 21% and 11%, respectively, to $227.6 million and $75.2 million compared to 2012. Strong returns from our growth capital investments, primarily our MFT contracts, drove improved performance in 2013.

Oilfield revenue and gross profit in the quarter increased by 7% and 14%, respectively, to $47.5 million and $16.9 million compared to prior year. This improvement was driven by increased activity and growth capital contributions at our facilities. For the year, revenue and gross profit increased 2% and 13%, respectively, to $184.6 million and $69.7 million compared to 2012. Positive results at our facilities were driven by contributions from growth capital investments, increased volumes and improved commodity prices. This improvement was partially offset by a decline in drill site.

Industrial revenue in the quarter decreased by 8% to $93.8 million while gross profit increased by 62% to $11.6 million, compared to prior year. The improvement in gross profit was primarily driven by lower amortization at the Stoney Creek Landfill ("SCL") and contributions from Eastern Industrial. 2013 revenue and gross profit was $371.2 million and $43.7 million, respectively, relatively flat to prior year. Improved results from our processing facilities and onsite services were offset by lower contributions from our oil recycling services.

Revenue & Adjusted EBITDA ($Millions): http://media3.marketwire.com/docs/NewaltaGraphs.pdf

Capital expenditures for the three months and year ended December 31, 2013, were $72.2 million and $171.1 million, respectively, focused primarily on growth capital projects in New Markets and Oilfield.

OUTLOOK

As we enter 2014, we are poised for growth, supported by our growth capital program and the comprehensive review to improve productivity and profitability. We have initiated several actions related to this review and expect to see some benefits from these actions as early as Q1 2014.

Compared to Q1 2013, we are expecting Q1 2014 (excluding the impact of restructuring costs) to be significantly stronger across all three divisions. Commodity prices and drilling activity are expected to improve while volumes at SCL and Ville Ste-Catherine ("VSC") will be in line with our historical quarterly average. In Q1 2014, we expect Total Debt to Adjusted EBITDA to increase, as it did in Q1 2013, due to timing of cash outflows related to our 2013 capital program; and then to steadily improve through the year to end 2014 at approximately 2.50.

In 2014, growth capital investments combined with profitability initiatives focused primarily on the Industrial Division and reductions in SG&A, will drive strong returns and improved results over prior year. Our 2013 growth capital investments in satellites will deliver returns from six new satellites operational for most of the year, three in Canada and three in the US. In addition, our 2014 capital program includes the construction of five new satellites in Oilfield and the U.S. Improved market conditions and management initiatives are expected to drive improvements in both our oil recycling and drill site businesses. Activity levels at VSC, SCL and in the oil and gas sector are expected to be in line with 2013. Total Adjusted SG&A will be approximately 10% of annualized revenue. We continue to focus on growing our portfolio of longer term contracts, strengthening our foundation of stable cash flow, and maximizing returns from our existing assets.

RECENT DEVELOPMENTS

In December, we announced a comprehensive review to improve productivity and profitability, particularly in the Industrial Division and in SG&A expenses across the organization.

We have developed a plan focused on rationalizing our Eastern Industrial operations and related overhead. The plan includes redirecting lines of business, consolidations, closures and divestitures of certain facilities, as well as overhead reductions related to supporting impacted operations. We will execute the plan throughout 2014, though expect to implement the bulk of the plan in the first half of the year. Once implemented, we expect approximately $10 million in annualized ongoing cash savings and approximately $5 million in one-time cash restructuring costs. To date in Q1, we have taken actions that will deliver 60% of the identified savings, including closure of three facilities in eastern Canada and overhead reductions in associated support functions.

With respect to SG&A, we are assessing our current cost structure to align resources with business needs, and anticipate additional cost savings to those identified under the Industrial plan above.

We continue to assess our cost structure across all business lines and further actions may be implemented. Management will assess and update savings and cost estimates throughout the year.

RESULTS OF OPERATIONS - NEW MARKETS

OVERVIEW

New Markets includes a network of more than 10 locations with over 400 employees in western Canada and the U.S. New Markets' services involve the mobilization of equipment and our people to manage waste on our customers' sites; the processing of oilfield-generated wastes and the sale of recovered crude oil to our account at our locations. New Markets is organized into the Heavy Oil and U.S. business units.

We operate onsite services in both Heavy Oil and U.S. Onsite services include: site remediation, dredging and dewatering and drill site processing equipment, including solids control and drill cuttings management. In Heavy Oil, we provide specialized onsite services using centrifugation for heavy oil producers involved in heavy oil mining and Steam-assisted gravity drainage ("SAGD") production. Our onsite services, excluding drill site, generally follow a similar sales cycle. We establish our market position through the execution of short-term projects which ideally may lead to longer term contracts, providing a more stable cash flow. The cycle to establish longer term contracts can be between 18 months to three years. Characteristics of projects and contracts are:


--  Projects:  non-recurring and/or seasonal services completed in less than
    one year, primarily completed between March and November and will vary
    from period-to-period, and

--  Contracts: generally are year round arrangements based on fee for
    service solutions with terms longer than one year, no direct commodity
    price exposure and may evolve from projects.

The business units contributed the following to division revenue:


                                   Three months ended            Year ended
                                         December 31,          December 31,
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Heavy Oil                               77%        70%        74%        69%
U.S.                                    23%        30%        26%        31%
----------------------------------------------------------------------------

New Markets Revenue ($Millions) & New Markets Gross Profit ($Millions): http://media3.marketwire.com/docs/NewaltaGraphs.pdf

The following table compares New Market's results for the periods indicated:


                           Three months
                                  ended                  Year ended
                           December 31,                December 31,
                                              %                           %
($000s)                    2013    2012  change      2013      2012  change
----------------------------------------------------------------------------
Revenue                  62,531  52,520      19   227,572   188,837      21
Cost of Sales            44,839  35,452      26   152,406   121,085      26
----------------------------------------------------------------------------
Gross Profit             17,692  17,068       4    75,166    67,752      11
----------------------------------------------------------------------------
Gross Profit as % of
 revenue                     28%     32%    (13)       33%       36%     (8)
----------------------------------------------------------------------------
Amortization (included
 in Cost of sales)        5,629   4,393      28    18,200    12,263      48
----------------------------------------------------------------------------
Divisional EBITDA(1)     23,321  21,461       9    93,366    80,015      17
----------------------------------------------------------------------------
Divisional EBITDA as %
 of revenue                  37%     41%    (10)       41%       42%     (2)
----------------------------------------------------------------------------
Maintenance capital       7,735   2,089     270    10,312     6,620      56
----------------------------------------------------------------------------
Growth capital           29,173  15,394      90    68,390    66,584       3
----------------------------------------------------------------------------
Assets employed(2)                                286,913   221,502      30
----------------------------------------------------------------------------
Assets contributing(3)                            230,313   200,702      15
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  "Divisional EBITDA" is a measure of the division's profitability and an
    indication of the results generated by the division's principal business
    activities prior to how the assets are amortized. Divisional EBITDA is
    the sum of gross profit and amortization.
2.  "Assets employed" is provided to assist management and investors in
    determining the effectiveness of the use of the assets at a divisional
    level. Assets employed is the sum of capital assets, intangible assets
    and goodwill allocated to each division. Assets employed as defined does
    not include capital assets held by corporate. Corporate assets include
    information technology, leasehold improvements and technical
    development. 2012 information has been restated to conform to current
    presentation.
3.  "Assets contributing" is provided to assist management and investors to
    understand how our capital spending contributes to our growth. It
    excludes assets related to growth capital projects not yet operational.

Q4 2013 revenue and gross profit from New Markets increased 19% and 4%, respectively, to $62.5 million and $17.7 million compared to prior year. Improved performance was driven by growth in Heavy Oil partially offset by non-recurring charges of $1.5 million related to the DOL settlement. Excluding the DOL settlement, Divisional EBITDA as a percentage of revenue was approximately 40%, in line with Q4 2012.

2013 revenue and gross profit increased 21% and 11%, respectively, to $227.6 million and $75.2 million compared to prior year. Strong returns from our growth capital investments in Heavy Oil drove improved performance. Revenue from contracts (fee for service solutions with terms longer than one year and no direct commodity price exposure) generated 46% of annual divisional revenue, compared to 37% in 2012.

In 2013, we made significant progress on our New Market growth plans, specifically:


--  invested over $68 million in growth capital to support our Heavy oil
    contracts and U.S. satellite expansion;

--  signed contract with Shell to process MFT; built, commissioned and began
    operations in the fall;

--  successfully extended winter operations through to the end of the year
    at the Syncrude MFT site; and

--  established three new satellites in the U.S., one in Eagle Ford and two
    in the Bakken.

HEAVY OIL

Heavy Oil is dedicated to serving both the oil sands in Alberta and the heavy oil region in Alberta and Saskatchewan. We began working in the heavy oil industry 18 years ago when we introduced centrifugation as a solution to treat waste oil emulsions. This business has expanded from processing heavy oil waste at facilities in our network to long-term contracts to process waste on our customers' site. Leveraging our facilities as staging areas, we deliver a broad range of specialized services at numerous customer sites.

Heavy Oil revenue is primarily generated from:


----------------------------------------------------------------------------
                                                                  % of
Revenue                                                           Annual
Stream      Description                Factors Impacting Results  Revenue
----------------------------------------------------------------------------
Onsite      Provides specialized       - Number and scope of      55 to 65
            onsite services using      projects and contracts
            centrifugation for heavy   directly impacted by our
            oil producers involved in  ability to attract and
            heavy oil mining and SAGD  retain customers as new
            production.                heavy oil operations come
                                       on stream.

                                       - Timing of project and
                                       contracts since the onsite
                                       services we provide
                                       typically cannot be
                                       performed during the
                                       winter months.
----------------------------------------------------------------------------
Facilities  Processes oilfield-        - Production activity      35 to 45
            generated wastes including drives the amount and make
            treatment, water disposal  up of waste generated by
            and landfilling, as well   customers.
            as the sale of recovered
            crude oil to our account.  - Crude oil prices impact
                                       the price we receive for
                                       the crude oil recovered to
                                       our account from waste
                                       volumes and can impact
                                       future production
                                       activity.
----------------------------------------------------------------------------

Over the past five years we have worked with customers to develop specialized onsite services where revenue is generally based on processed volumes, with no exposure to crude oil prices for these services. In addition, these services create cost savings and provide more environmentally beneficial solutions for our customers. Growth in this business will come from further development of onsite services.

Q4 2013 revenue increased 32% compared to prior year due to increased volumes at our facilities and returns from growth capital invested in onsite. For the year, revenue increased 29% primarily driven by returns from growth capital invested, including our two contracts to process MFT.


                                Three months
                                       ended              Year ended
                                December 31,            December 31,
                                                  %                        %
                                2013    2012 change     2013    2012  change
----------------------------------------------------------------------------
Recovered crude oil ('000
 bbl)(1)                          65      55     18      269     216      25
Average crude oil price
 received (CDN$/bbl)           60.13   60.42      -    67.06   65.51       2
Recovered crude oil sales ($
 millions)                       3.9     3.3     18     18.0    14.1      28
Western Canadian Select
 (CDN$/bbl)(2)                 68.44   69.46     (1)   74.98   73.12       3
----------------------------------------------------------------------------

1.  Represents the total crude oil recovered and sold for our account.
2.  Western Canadian Select ("WCS") is a readily available industry
    benchmark for heavy crude oil.

Recovered Crude Oil ('000 BBL) & Average WTI and Heavy Oil Price Received ($CAD): http://media3.marketwire.com/docs/NewaltaGraphs.pdf

U.S.

We entered the U.S. market in 2006 with our drill site services and expanded our offering to include onsite work for our customers.

U.S. revenue is primarily generated from:


----------------------------------------------------------------------------
                                                                  % of
                                         Factors Impacting        Annual
Revenue Stream  Description              Results                  Revenue
----------------------------------------------------------------------------
Drill site      Provides the supply and  -Drill site utilization  75 to 85
                operation of drill site  is impacted by the
                processing equipment,    number of active
                including equipment for  drilling rigs in the
                solids control and drill markets we serve.
                cuttings management.
----------------------------------------------------------------------------
Onsite,         Provides site            - Price of crude oil     15 to 25
satellites and  remediation,             impacts the oil and gas
partnerships    centrifugation and water industry and the type of
                management solutions.    drilling activity.

                                         - Drilling activity will
                                         impact the volume of
                                         waste received, with the
                                         makeup of that waste
                                         being affected by
                                         specific drilling
                                         techniques employed.

                                         - Competition in the
                                         areas we service. U.S.
                                         onsite remains in the
                                         early stage of
                                         development and we are
                                         engaged primarily in
                                         short-term or project
                                         based work, which will
                                         vary from quarter-to-
                                         quarter.
----------------------------------------------------------------------------

Revenue in Q4 2013 decreased 11% compared to prior year, due to lower drill site utilization. 2013 revenue increased 2% compared to 2012. Increased revenue from our growth capital investments, primarily our Eagle Ford satellite, was offset by the decrease in drill site utilization.


                           Three months
                                  ended                 Year ended
                           December 31,               December 31,
                          2013     2012 % change     2013     2012 % change
----------------------------------------------------------------------------
Equipment
 Utilization(1)             48%      62%     (23)      55%      61%     (10)
Average equipment
 available                 123      122        1      123      124       (1)
----------------------------------------------------------------------------

1.  Billable days as a percentage of potential rental days.

U.S. Drill Site Equipment Utilization: http://media3.marketwire.com/docs/NewaltaGraphs.pdf

RESULTS OF OPERATIONS - OILFIELD DIVISION

OVERVIEW

Oilfield includes an integrated network of over 30 locations with more than 450 employees to service key markets in British Columbia, Alberta, Saskatchewan and Manitoba.

Oilfield generates revenue from:


----------------------------------------------------------------------------
                                       Factors Impacting      % of Annual
Revenue Stream  Description            Results                Revenue
----------------------------------------------------------------------------
Facilities      Processes oilfield-    - Crude oil prices     75 to 85
including our   generated wastes,      impact the price we
satellite and   including: treatment,  receive for the crude
mobile          water disposal, clean  oil recovered to our
processing      oil terminalling,      account from waste
locations       custom treating and    volumes.
                landfilling, as well
                as the sale of         - Drilling activity,
                recovered crude oil to including metres
                our account.           drilled, and drilling
                                       techniques will impact
                                       the volume and make up
                                       of waste received.
                                       Ongoing production
                                       accounts for
                                       approximately 55% of
                                       our waste volume.
----------------------------------------------------------------------------
Onsite and      Provides the supply    - Drill site           15 to 25
drill site      and operation of drill utilization is
                site processing        impacted by the number
                equipment, including:  of active drilling
                equipment for solids   rigs in the markets we
                control and drill      serve in the Western
                cuttings management,   Canadian Sedimentary
                site remediation and   Basin ("WCSB").
                centrifugation.
----------------------------------------------------------------------------

This segment is also impacted by seasonality due to road bans which restrict drilling activity in the second quarter.

Oilfield Revenue ($Millions) & Oilfield Gross Profit ($Millions): http://media3.marketwire.com/docs/NewaltaGraphs.pdf

The following table compares Oilfield's results for the periods indicated:


                            Three months
                                   ended                Year ended
                            December 31,              December 31,
($000s)                    2013     2012 % change    2013     2012 % change
----------------------------------------------------------------------------
Revenue                  47,480   44,486        7 184,607  181,067        2
Cost of Sales            30,625   29,665        3 114,894  119,535       (4)
----------------------------------------------------------------------------
Gross Profit             16,855   14,821       14  69,713   61,532       13
----------------------------------------------------------------------------
Gross Profit as % of
 revenue                     36%      33%       9      38%      34%      12
----------------------------------------------------------------------------
Amortization (included
 in Cost of sales)        3,344    3,086        8  12,409   11,950        4
----------------------------------------------------------------------------
Divisional EBITDA(1)     20,199   17,907       13  82,122   73,482       12
----------------------------------------------------------------------------
Divisional EBITDA as %
 of revenue                  43%      40%       8      44%      41%       7
----------------------------------------------------------------------------
Maintenance capital       2,389    1,541       55   8,297    8,366       (1)
----------------------------------------------------------------------------
Growth capital           19,303   12,624       53  38,255   26,818       43
----------------------------------------------------------------------------
Assets employed(2)                                384,673  350,688       10
----------------------------------------------------------------------------
Assets contributing(3)                            357,873  321,288       11
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  "Divisional EBITDA" is a measure of the division's profitability and an
    indication of the results generated by the division's principal business
    activities prior to how the assets are amortized. Divisional EBITDA is
    the sum of gross profit and amortization.
2.  "Assets employed" is provided to assist management and investors in
    determining the effectiveness of the use of the assets at a divisional
    level. Assets employed is the sum of capital assets, intangible assets
    and goodwill allocated to each division. Assets employed as defined does
    not include capital assets held by corporate. Corporate assets include
    information technology, leasehold improvements and technical
    development. 2012 information has been restated to conform to current
    presentation.
3.  "Assets contributing" is provided to assist management and investors to
    understand how our capital spending contributes to our growth. It
    excludes assets related to growth capital projects not yet operational.

Q4 2013 Oilfield revenue increased 7% while gross profit and divisional EBITDA increased 14% and 13%, respectively, compared to prior year. Results were positively impacted by strong contributions from growth capital investments and increased waste volumes. 2013 revenue was flat while gross profit increased 13% compared to the prior year. Strong contributions at our oilfield facilities from growth capital investments, increased waste volumes and improved commodity prices drove improved performance throughout the year. These gains were partially offset by a decline in drill site utilization. Drill site utilization was 24%, down from 41% in 2012.

In 2013, we made the following progress on our Oilfield growth plans, specifically:


--  invested over $38 million in growth capital primarily focused on our
    satellite expansion and productivity improvements;

--  constructed three new satellites, one in Kindersley, SK which began
    operations mid-year, and another two in Shaunavon, SK and Waskada, MB
    which will begin operations in early 2014;

--  successfully commissioned a thermal solids processing technology at one
    our facilities expanding our service offerings; and

--  secured a strategic partner as part of our plan to recover our drill
    site business. Our alliance with Baroid, a Halliburton Product Service
    Line, will offer integrated onsite solutions for fluids and waste
    management in western Canada.

OILFIELD FACILITIES METRICS AND INDUSTRY DRIVERS


                             Three months
                                    ended                Year ended
                             December 31,              December 31,
                             2013    2012 % change     2013    2012 % change
----------------------------------------------------------------------------
Recovered crude oil ('000
 bbl)(1)                       72      76       (5)     289     267        8
Average crude oil price
 received (CDN$/bbl)        78.41   76.84        2    85.19   79.70        7
Recovered crude oil sales
 ($ millions)                 5.6     5.9       (5)    24.6    21.3       15
Edmonton par price
 (CDN$/bbl)(2)              85.89   84.05        2    92.90   86.16        8
----------------------------------------------------------------------------

1.  Represents the total crude oil recovered and sold for our account.
2.  Edmonton par is an industry benchmark for conventional crude oil.

Recovered Crude Oil ('000 BBL) & Average WTI and Oilfield Price Received ($CAD) & Metres Drilled in WCSB: http://media3.marketwire.com/docs/NewaltaGraphs.pdf

RESULTS OF OPERATIONS - INDUSTRIAL DIVISION

OVERVIEW

Industrial includes an integrated network of more than 35 locations with over 900 employees to service key market areas across Canada. This division features Canada's largest lead-acid battery recycling facility located at Ville Ste-Catherine, Quebec, an engineered non-hazardous solid waste landfill located at Stoney Creek, Ontario, and a used oil re-refining facility in North Vancouver. We also provide onsite services which are in the early stages of development. We are currently engaged primarily in short-term or event-based projects, which will vary from quarter-to-quarter. We are striving to develop a strong customer partnership approach and service differentiation to secure Newalta brand loyalty and further develop this business.

Industrial is organized into Western Industrial and Eastern Industrial business units.

The business units contributed the following to division revenue:


                                   Three months ended            Year ended
                                         December 31,          December 31,
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Western Industrial                      24%        22%        24%        26%
Eastern Industrial                      76%        78%        76%        74%
----------------------------------------------------------------------------
VSC as a % of Industrial
 Division                               31%        36%        32%        30%
----------------------------------------------------------------------------

Industrial Revenue ($Millions) & Industrial Gross Profit ($Millions): http://media3.marketwire.com/docs/NewaltaGraphs.pdf

The following table compares Industrial's results for the periods indicated:


                           Three months
                                  ended                 Year ended
                           December 31,               December 31,
($000s)                   2013     2012 % change     2013     2012 % change
----------------------------------------------------------------------------
Revenue                 93,788  101,439       (8) 371,217  356,305        4
Cost of Sales           82,240   94,291      (13) 327,558  315,831        4
----------------------------------------------------------------------------
Gross Profit            11,548    7,148       62   43,659   40,474        8
----------------------------------------------------------------------------
Gross Profit as % of
 revenue                    12%       7%      71       12%      11%       9
----------------------------------------------------------------------------
Amortization (included
 in Cost of sales)       3,738    6,792      (45)  21,650   24,811      (13)
----------------------------------------------------------------------------
Divisional EBITDA(1)    15,286   13,940       10   65,309   65,285        -
----------------------------------------------------------------------------
Divisional EBITDA as %
 of revenue                 16%      14%      14       18%      18%       -
----------------------------------------------------------------------------
Maintenance capital      3,494    6,639      (47)   7,980   14,792      (46)
----------------------------------------------------------------------------
Growth capital           3,784    6,654      (43)  15,301   18,241      (16)
----------------------------------------------------------------------------
Assets employed(2)                                407,779  428,394       (5)
----------------------------------------------------------------------------
Assets contributing(3)                            395,479  406,794       (3)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  "Divisional EBITDA" is a measure of the division's profitability and an
    indication of the results generated by the division's principal business
    activities prior to how the assets are amortized. Divisional EBITDA is
    the sum of gross profit and amortization.
2.  "Assets employed" is provided to assist management and investors in
    determining the effectiveness of the use of the assets at a divisional
    level. Assets employed is the sum of capital assets, intangible assets
    and goodwill allocated to each division. Assets employed as defined does
    not include capital assets held by corporate. Corporate assets include
    information technology, leasehold improvements and technical
    development. 2012 information has been restated to conform to current
    presentation.
3.  "Assets contributing" is provided to assist management and investors to
    understand how our capital spending contributes to our growth. It
    excludes assets related to growth capital projects not yet operational.

Compared to Q4 2012, Q4 revenue decreased by 8% while Divisional EBITDA increased 10%. Results were primarily driven by contributions from Eastern Industrial, particularly VSC, which benefited from productivity initiatives and improved market conditions.

Gross profit increased by 62% compared to Q4 2012, primarily due to lower amortization at SCL and contributions from Eastern Industrial. The decrease in amortization was primarily driven by an amendment to our landfill permit.

2013 Industrial revenue and Divisional EBITDA was relatively flat to prior year. Results were weighed down by lower contributions in Q1 2013 due to reduced commodity prices and lower event-based business at SCL. Performance throughout the remainder of 2013 improved, with Divisional EBITDA for the last three quarters of 2013 up 8% over the same period in 2012. Results from our industrial processing facilities and onsite services drove this improvement and were tempered by lower contributions from our oil recycling services.

Assets employed and assets contributing declined by 5% and 3%, respectively, due largely to a $21.2 million restructuring related impairment charge recognized in Q4. This charge related to certain Eastern Industrial facilities planned for closure or sale in 2014 as part of the rationalization plan announced in December 2013.

In 2013, we made the following progress in Industrial, specifically:


--  initiated a comprehensive review with a focus on improving returns with
    plans to streamline, realign resources, and rationalize business lines
    and facilities;

--  invested over $15 million in growth capital related to waste water
    management and service expansion, including: expanded services in
    Atlantic region to process offshore drilling waste and established new
    operating location in western Canada for onsite operations.

WESTERN INDUSTRIAL

Western Industrial draws its revenue from the following industries in western Canada: construction, forestry, manufacturing, mining, oil and gas, petrochemical, pulp and paper, refining, and transportation service. Western Industrial generates revenue from:


----------------------------------------------------------------------------
                                       Factors Impacting      % of Annual
Revenue Stream  Description            Results                Revenue
----------------------------------------------------------------------------
Oil Recycling   Includes the           - Base oil prices      50 to 60
Services        collection of waste    impact the price we
                lube oils, re-refining receive for our
                and processing to      finished products.
                produce virgin quality
                base oil and the sale  - The availability of
                of finished products   waste lube oil.
                as well as industrial
                fuels and fuel
                distillates.
----------------------------------------------------------------------------
Facilities      Processes industrial   - The state of the     35 to 45
                wastes including their economy impacts
                collection, treatment  activity levels in the
                and disposal.          industries we serve.
----------------------------------------------------------------------------
Onsite          Provides site          - The state of the     up to 10
                remediation,           economy impacts
                centrifugation and     activity levels in the
                water management       industries we serve.
                solutions.
                                       - Our ability to
                                       attract and retain
                                       customers.
----------------------------------------------------------------------------

Western Industrial revenue in Q4 2013 and 2013 was flat to prior year. Improved performance from our industrial processing facilities and onsite services was offset by weaker results from our oil recycling services.


                                 Three months
                                        ended             Year ended
                                 December 31,           December 31,
                                                   %                      %
                                  2013   2012 change     2013   2012 change
----------------------------------------------------------------------------
Base oil sales ('000 litres)     4,600  4,700     (2)  18,500 18,200      2
Motiva (CDN$/litre)               1.07   1.07      -     1.02   1.18    (14)
----------------------------------------------------------------------------

EASTERN INDUSTRIAL

Eastern Industrial is comprised of locations in Ontario, Quebec and Atlantic Canada and draws its revenue from the following industries in eastern Canada and the bordering U.S. states: automotive, construction, forestry, manufacturing, mining, oil and gas, petrochemical, pulp and paper, refining, steel, and transportation service.

Revenue is primarily derived from:


----------------------------------------------------------------------------
                                       Factors Impacting      % of Annual
Revenue Stream  Description            Revenue:               Revenue
----------------------------------------------------------------------------
Ville Ste.      Recycles lead-acid     - The ratio of direct  40 to 50
Catherine       batteries and produces lead sales and tolling
                refined lead products  fees received for
                for a tolling fee or   processing batteries.
                for sale to battery
                manufacturers.         - Price of lead
                                       affects our direct
                                       sales revenue and
                                       waste battery
                                       procurement costs. The
                                       cost to acquire waste
                                       batteries is generally
                                       related to production
                                       capacity in the
                                       industry.

                                       - Tolling fees are
                                       generally fixed,
                                       reducing our exposure
                                       to lead prices.

                                       - U.S./Canadian dollar
                                       exchange rate impacts
                                       revenue and
                                       procurement costs.
----------------------------------------------------------------------------
Facilities      Processes industrial   - The state of the     25 to 35
                wastes, including      economy impacts
                their collection,      activity levels in the
                treatment and          industries we serve.
                disposal.
----------------------------------------------------------------------------
Onsite          Provides dredging,     - The state of the     10 to 20
                centrifugation and a   economy impacts
                fleet of specialized   activity levels in the
                vehicles and equipment industries we serve.
                for emergency
                response.              - Our ability to
                                       attract and retain
                                       customers.
----------------------------------------------------------------------------
SCL             Receives non-hazardous - The state of the     5 to 15
                solid waste with an    economy impacts
                annual permitted       activity levels in the
                capacity of 750,000 MT industries we serve.
                of waste per year.
                                       - Fluctuations in
                                       event-based waste
                                       receipts.
----------------------------------------------------------------------------

Q4 2013 Eastern Industrial revenue decreased 10% from Q4 2012. Growth at our processing facilities was more than offset by lower VSC revenue and SCL volumes due to timing. Q4 2013 VSC revenue decreased 21% due primarily to a shift in our tolling/direct mix towards tolling sales.

2013 Eastern Industrial revenue increased 6%. Strong results at industrial processing facilities and VSC were partially offset by somewhat lower volumes at SCL. VSC revenue increased 11% due to higher volumes and improved commodity pricing. Our tolling/direct mix was approximately 50/50 for 2013, consistent with 2012.


                          Three months
                                 ended                 Year ended
                          December 31,               December 31,
                          2013    2012  % change     2013    2012  % change
----------------------------------------------------------------------------
Lead Volume (MT)        19,200  17,600         9   68,600  64,700         6
LME Lead (US$/MT)        2,097   2,167        (3)   2,151   2,041         5
----------------------------------------------------------------------------


                          Three months
                                 ended                 Year ended
                          December 31,               December 31,
                          2013    2012  % change     2013    2012  % change
----------------------------------------------------------------------------
SCL Volume Collected
 ('000 MT)                 113     228       (50)     732     750        (2)
----------------------------------------------------------------------------

CORPORATE AND OTHER


                             Three months
                                    ended               Year ended
                             December 31,             December 31,
($000s)                      2013    2012 % change    2013    2012 % change
----------------------------------------------------------------------------
Selling, general and
 administrative expenses
 ("SG&A")                  34,046  28,969       18 114,965 102,389       12
  Adjusted for:
    Stock-based
     compensation           4,062   5,425      (25)  9,494  12,258      (23)
    Amortization            3,973   3,526       13  14,738  13,485        9
----------------------------------------------------------------------------
Adjusted SG&A              26,011  20,018       30  90,733  76,646       18
  Adjusted SG&A as a % of
   revenue                   12.8%   10.1%      26    11.6%   10.6%       9
----------------------------------------------------------------------------
  Adjusted for:
    Non-recurring items(1)  2,814       -      100   5,661       -      100
----------------------------------------------------------------------------
Adjusted SG&A before non-
 recurring items           23,197  20,018       16  85,072  76,646       11
  Adjusted SG&A before
   non-recurring as a % of
   revenue                   11.4%   10.1%      13    10.9%   10.6%       3
----------------------------------------------------------------------------

1.  Non-recurring items include prior year charges related to the DOL
    settlement, charges for positions eliminated during the period, and the
    settlement of an out of period disputed account.

The above table removes stock-based compensation, amortization and non-recurring items from SG&A to provide improved transparency with respect to the comparison of our results. In addition, SG&A includes research and development expenses related to our Technical Development group.

Q4 2013 and 2013, Adjusted selling general and administrative ("Adjusted SG&A") was up 30% and 18%, respectively, from the prior year. This increase was driven by non-recurring items and investments in people and people development to support our growth initiatives. Adjusted SG&A before non-recurring items was 10.9% of our annual revenue.

Stock-based compensation fluctuates based on the effects of vesting, volatility in our share price and dividend rate changes. Approximately 55% of stock-based compensation expense is estimated to be settled with equity, with the balance to be settled in cash.


                            Three months
                                   ended                Year ended
                            December 31,              December 31,
($000s)                     2013    2012 % change    2013     2012 % change
----------------------------------------------------------------------------
Bank fees and interest     1,603     228      603   4,940    4,336       14
Debenture interest,
 accretion of issue
 costs, and other          4,995   4,996        -  19,978   19,978        -
----------------------------------------------------------------------------
Finance charges before
 unwinding of the
 discount(1)               6,598   5,224       26  24,918   24,314        2
Unwinding of the
 discount(2)                 671     616        9   2,599    2,482        5
----------------------------------------------------------------------------
Finance charges            7,269   5,840       24  27,517   26,796        3
----------------------------------------------------------------------------
Non-cash loss (gain) on
 embedded derivatives(3)  (3,406)   (602)    (466) (3,036) (13,439)     (77)
----------------------------------------------------------------------------
Net financing charges      3,863   5,238      (26) 24,481   13,357       83
----------------------------------------------------------------------------

1.  Reflects capitalized interest of $520 and $2,798 in Q4 2013 and 2013,
    respectively, and $1,595 and $4,664 in Q4 2012 and 2012, respectively.
2.  Relates to decommissioning liability.
3.  Relates to the early redemption feature for the Series 1 and 2 Senior
    Unsecured Debentures.

For the quarter, the increase in finance charges before the gain on the embedded derivatives and the unwinding of the discount was primarily attributable to lower capitalized interest on growth investments and higher average debt levels. Compared to 2012, 2013 finance charges before the gain on the embedded derivatives and the unwinding of the discount were flat.

The non-cash gain on the embedded derivatives is associated with the early redemption feature for the Series 1 and Series 2 Senior Unsecured Debentures (collectively the "Senior Unsecured Debentures") recognized during the quarter. This has no impact on current or future cash flows. The gain is an estimate of the fair value of the embedded derivatives and is primarily impacted by the risk-free rate, market volatility, and our credit spread. See Note 18 to the Financial Statements for further information.

Finance charges associated with the Senior Unsecured Debentures include annual coupon rates of 7.625% and 7.75% as well as the accretion of issue costs and gains or losses on the embedded derivatives for both series.


                             Three months
                                    ended               Year ended
                             December 31,             December 31,
($000s)                      2013    2012 % change    2013    2012 % change
----------------------------------------------------------------------------
Deferred taxes (recovery)  (2,690)    706     (481)  5,954  11,208      (47)
----------------------------------------------------------------------------
Effective tax rate           20.7%   14.6%      42    21.4%   20.8%       3
----------------------------------------------------------------------------

In Q4, deferred tax recovery was $2.7 million compared to deferred tax expense of $0.7 million in the prior year. The decrease was driven primarily by lower pre-tax income as a result of restructuring related impairment. Deferred taxes were also impacted by several items including: changes in statutory and other rates; non-deductible items including stock-based compensation and the gain on embedded derivatives; and changes in estimates in respect of prior year tax pools.

2013 deferred taxes decreased to $6.0 million from $11.2 million in 2012, impacted by the same factors as the quarter. The effective tax rate was relatively flat to prior year. Our statutory tax rate in Canada was 25.75% for 2013 and was 25.72% in 2012. Loss carry forwards were approximately $145 million at December 31, 2013. We do not anticipate paying significant income tax until 2017.

LIQUIDITY AND CAPITAL RESOURCES

The term liquidity refers to the speed with which a company's assets can be converted into cash, or its ability to do so, as well as cash on hand. Liquidity risk refers to the risk that we will encounter difficulty in meeting obligations associated with financial obligations that are settled by cash or another financial asset. Our liquidity risk may arise due to general day-to-day cash requirements and in the management of our assets, liabilities and capital resources. Liquidity risk is managed against our financial leverage to meet obligations and commitments in a balanced manner. For further information on our liquidity risk management, refer to Note 18 to the Financial Statements.

Our debt capital structure is as follows:


                                               December 31,    December 31,
($000s)                                                2013            2012
----------------------------------------------------------------------------
Use of Credit Facility:
  Amount drawn on Credit Facility                   117,136          76,500
  Letters of credit                                  16,230          16,046
  Cash on hand                                         (449)           (310)
----------------------------------------------------------------------------
                                                    132,917          92,236
Senior Unsecured Debentures                         250,000         250,000
----------------------------------------------------------------------------
Total Debt                                          382,917         342,236
Unused Credit Facility capacity                     117,083         132,764
----------------------------------------------------------------------------

We continue to focus on managing our working capital accounts while supporting our growth. Working capital at December 31, 2013, was negative $1.8 million (December 31, 2012: $10.6 million). The change was primarily driven by an increase in accounts payable and accrued liabilities due to the timing of payments at year end. At current activity levels, working capital is expected to be sufficient to meet our ongoing commitments and operational requirements of the business. We continue to manage working capital well within our prescribed targets, commensurate with activity levels. For further information on credit risk management, please refer to Note 18 to the Financial Statements.

DEBT RATINGS

DBRS Limited ("DBRS") and Moody's Investor Service, Inc. ("Moody's") provide a corporate and Senior Unsecured Debentures credit rating. During the fourth quarter, DBRS and Moody's reconfirmed the ratings outlined below.


Category                                                 DBRS        Moody's
----------------------------------------------------------------------------
Corporate Rating                                           BB            Ba3
Senior Unsecured Debentures                                BB             B1

SOURCES OF CASH

Our liquidity needs can be sourced in several ways including: Funds from operations, borrowings against or increases in our Credit Facility, new debt instruments, the issuance of securities from treasury, return of letters of credit or replacement of letters of credit with other types of financial security and proceeds from the sale of assets.

CREDIT FACILITY

At December 31, 2013, $117.1 million was available and undrawn to fund growth capital expenditures and for general corporate purposes, as well as to provide letters of credit to third parties for financial security up to a maximum amount of $60 million. The aggregate dollar amount of outstanding letters of credit is not categorized in the financial statements as long-term debt; however, the issued letters of credit reduce the amount available under the Credit Facility and are included in the definition of Total Debt for covenant purposes. Under the Credit Facility, surety bonds (including performance and bid bonds) to a maximum of $125 million are excluded from the definition of Total Debt. As at December 31, 2013, surety bonds issued and outstanding totalled $40.5 million. The principal borrowing amount within our credit facility is $250 million.

We renewed and extended our Credit Facility effective July 12, 2013. Key changes to the Credit Facility included extending it by one year, to July 12, 2016, increasing the amount available from $225 million to $250 million and improved pricing. Management may, at its option, request an extension of the Credit Facility on an annual basis. If no request to extend the Credit Facility is made by us, the entire amount of the outstanding indebtedness would be due in full on July 12, 2016.

Financial performance relative to the financial ratio covenants(1) under the Credit Facility is reflected in the table below.


                December September
                     31,       30, June 30, March 31, December 31,
                    2013      2013     2013      2013         2012 Threshold
----------------------------------------------------------------------------
Senior Secured
 Debt(2) to                                                           2.75:1
 EBITDA(3)        0.88:1    0.87:1   0.99:1    1.09:1       0.66:1   maximum
Total Debt(4)                                                         4.00:1
 to EBITDA(3)     2.54:1    2.54:1   2.78:1    2.99:1       2.46:1   maximum
Interest                                                              2.25:1
 Coverage         5.44:1    5.46:1   5.01:1    4.73:1       5.09:1   minimum
----------------------------------------------------------------------------

1.  We are restricted from declaring dividends if we are in breach of any
    covenants under our Credit Facility.
2.  Senior Secured Debt means the Total Debt less the Senior Unsecured
    Debentures.
3.  EBITDA is a non-IFRS measure, the closest measure of which is net
    earnings. For the purpose of calculating the covenant, EBITDA is defined
    as the trailing twelve-months consolidated net income for Newalta before
    the deduction of interest, taxes, depreciation and amortization, and
    non-cash items (such as non-cash stock-based compensation and gains or
    losses on asset dispositions and any extraordinary items). Additionally,
    EBITDA is normalized for any acquisitions or dispositions as if they had
    occurred at the beginning of the period.
4.  Total Debt comprises outstanding indebtedness under the Credit Facility,
    including bank overdraft balance and the Senior Unsecured Debentures.

Our Total Debt was $382.9 million as at December 31, 2013, which reflected a $40.7 million increase over December 31, 2012. The Total Debt to EBITDA ratio of 2.54 is in line with Q3 2013 and slightly above Q4 2012 of 2.46. Our covenant ratios under the Credit Facility remained well within their thresholds. We will manage within our covenants throughout 2014 while our business plan target for Total Debt to Adjusted EBITDA ratio remains at approximately 2.0.

SENIOR UNSECURED DEBENTURES


----------------------------------------------------------------------------
Term                     Series 1(1)               Series 2(1)
----------------------------------------------------------------------------
Principal                $125.0 million            $125.0 million
----------------------------------------------------------------------------
Interest rate            7.625%                    7.75%
----------------------------------------------------------------------------
Maturity                 November 23, 2017         November 14, 2019
----------------------------------------------------------------------------
Interest payable (in     May 23 and November 23    May 14 and November 14
arrears)                 each year                 each year
----------------------------------------------------------------------------
Debentures are           After November 23, 2013   Prior to November 14,
redeemable at the option In whole or in part, at   2015
of Newalta :             redemption prices         - Redemption price equal
                         expressed as percentages  to 107.75% of the
                         of the principal(3) if    principal amount(2,3)
                         redeemed during the
                         twelve month period       or
                         beginning on November 23
                         of the years as follows:  - In whole or in part, at
                                                   a redemption price which
                         - 2013 - 103.813%;        is equal to the greater
                         - 2014 - 102.542%;        of:
                         - 2015 - 101.906%;
                         2016 and thereafter -     (a) the Canada Yield
                         100%.                     Price (as defined in the
                                                   trust indenture) and

                                                   (b) 101% of the aggregate
                                                   principal amount of
                                                   Senior Unsecured
                                                   Debentures redeemed(3)

                                                   After November 14, 2015
                                                   In whole or in part, at
                                                   redemption prices
                                                   expressed as percentages
                                                   of the principal(3) if
                                                   redeemed during the
                                                   twelve month period
                                                   beginning on November 14
                                                   of the years as follows:

                                                   - 2015 - 103.875%;
                                                   - 2016 - 101.938%;
                                                   - 2017 and thereafter -
                                                   100%.
----------------------------------------------------------------------------

1.  If a change of control occurs, Newalta will be required to offer to
    purchase all or a portion of each debenture holder's Senior Unsecured
    Debentures, at a purchase price in cash equal to 101% of the principal
    amount of the Senior Unsecured Debentures offered for repurchase plus
    accrued interest to the date of purchase.
2.  Up to 35% of the aggregate principal amount with the net cash proceeds
    of one or more public equity offerings.
3.  Plus interest to the date of redemption.

The Senior Unsecured Debentures are unsecured senior obligations and rank equally with all other existing and future unsecured senior debt and are senior to any subordinated debt that may be issued by Newalta or any of its subsidiaries. The Senior Unsecured Debentures are effectively subordinated to all secured debt to the extent of collateral on such debt.

The trust indenture, under which the Senior Unsecured Debentures have been issued, contains certain annual restrictions and covenants that, subject to certain exceptions, limit our ability to incur additional indebtedness, pay dividends, make certain loans or investments and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.

Covenants under our trust indenture include:


----------------------------------------------------------------------------
                               December   December
Ratio                          31, 2013   31, 2012                 Threshold
----------------------------------------------------------------------------
Senior Secured Debt including                       $25,000 + the greater of
 Letters of Credit              133,366     92,546 $220,000 and 1.75x EBITDA
Cumulative finance lease
 obligations                        nil        nil           $25,000 maximum
Consolidated Fixed Charge
 Coverage                        5.20:1     5.09:1            2.00:1 minimum
Period end surplus for                                   Restricted payments
 restricted payments(1)         121,385    110,739     cannot exceed surplus
----------------------------------------------------------------------------

1.  We are restricted from declaring dividends, purchasing and redeeming
    shares or making certain investments if the total of such amounts
    exceeds the period end surplus for such restricted payments.

We will manage within our covenants throughout 2014.

USES OF CASH

Our primary uses of funds include maintenance and growth capital expenditures as well as acquisitions, payment of dividends, operating and SG&A expenses and the repayment of debt.

CAPITAL EXPENDITURES

"Growth capital expenditures" or "growth and acquisition capital expenditures" are capital expenditures that are intended to improve our efficiency and productivity, allow us to access new markets and diversify our business. Growth capital, or growth and acquisition capital, are reported separately from maintenance capital because these types of expenditures are discretionary. "Maintenance capital expenditures" are capital expenditures to replace and maintain depreciable assets at current service levels. Maintenance capital expenditures are reported separately from growth activity because these types of expenditures are not discretionary and are required to maintain current operating levels. On an annual basis, maintenance capital, combined with repair and maintenance expense, (included in cost of sales), is approximately 8% of the value of property, plant and equipment. Maintenance capital and repair and maintenance expense combined, approximate amortization expense.

Capital expenditures for the periods indicated are as follows:


                                      Three months ended          Year ended
                                            December 31,        December 31,
($000s)                                   2013      2012      2013      2012
----------------------------------------------------------------------------
Growth capital expenditures             57,786    45,311   141,461   137,388
Maintenance capital expenditures        14,432    12,089    29,679    34,952
----------------------------------------------------------------------------
Total capital expenditures(1)           72,218    57,400   171,140   172,340
----------------------------------------------------------------------------

1.  The numbers in this table differ from Consolidated Statements of Cash
    Flows because the numbers above do not reflect the net change in working
    capital related to capital asset accruals.

Capital expenditures for the three months and year ended December 31, 2013, were $72.2 million and $171.1 million, respectively. Growth capital expenditures in the quarter and year primarily relate to equipment for our MFT contracts, satellite facilities, expansion at our Oilfield facilities and Technical Development. Maintenance capital expenditures relate primarily to process equipment improvements at our facilities. Capital expenditures in the quarter and year were funded from funds from operations and our credit facility.

Reflecting the ongoing strength of our pipeline of capital projects and organic growth opportunities, particularly in New Markets and Oilfield, our 2014 capital budget is $180 million, with growth capital and maintenance expenditures of $145 million and $35 million, respectively. We will continue to invest in New Markets and Oilfield to drive strong returns and growth in our core growth areas. The capital program will be funded primarily by funds from operations. We expect to spend approximately 40% of the capital budget in the first half of 2014.

Growth expenditures will comprise of approximately $70 million for New Markets, $40 million for Oilfield, $8 million for Industrial and $12 million for onsite equipment, available to all divisions. The remaining $15 million in growth capital expenditures are for Technical Development and corporate investments.

We may revise the capital budget, from time-to-time, in response to changes in market conditions that materially impact our financial performance and/or investment opportunities. Management evaluates capital projects based on their internal rate of return, timing of payback, fit with our corporate strategy, and the risk associated with the projects, among other factors. Capital spending is prioritized towards projects that provide stable cash flows and where there is a high degree of certainty of completing the project on time and on budget. Of the total divisional growth capital expenditures over the last three years, 50% has been allocated to New Markets, 30% to Oilfield and 20% to Industrial. Going forward, we anticipate annual Industrial growth capital expenditures to be approximately 10% of the total divisional growth capital spend.

Management targets a three to four year cash flow payback on growth capital investments at the branch or project level, once capital is contributing. After allocation of supporting overheads, management targets a blended return of between four and five years on all growth capital.

Management and the Board also review corporate and division return on capital metrics, applying traditional definitions of Return on Capital Employed ("ROCE"), (where we apply Net earnings plus tax adjusted interest as the numerator and Net Assets as the denominator), as well as a ROC - Cash and Divisional ROC as one of the means to evaluate overall effectiveness of our growth capital program.

DIVIDENDS AND SHARE CAPITAL

In determining the dividend to be paid to our shareholders, the Board of Directors considers a number of factors, including: the forecasts for operating and financial results; maintenance and growth capital requirements; as well as market activity and conditions. After a review of all factors, the Board declared $6.1 million in dividends or $0.11 per share, paid January 15, 2014, to shareholders on record as at December 30, 2013.

As at February 20, 2014, Newalta had 55,452,192 shares outstanding, and outstanding options to purchase up to 4,018,334 shares.

CONTRACTUAL OBLIGATIONS

Our contractual obligations, as at December 31, 2013 were:


----------------------------------------------------------------------------
                                    Less than
($000s)                       Total  one year 1-3 years 4-5 years Thereafter
----------------------------------------------------------------------------
Office leases                68,643    10,224    31,281     9,296     17,842
Operating leases(1)          11,570     5,811     5,608       151          -
Surface leases                2,385       447     1,341       447        150
Senior long-term debt(2)    117,136         -   117,136         -          -
Senior unsecured
 debentures                 344,011    19,219   181,664     9,688    133,440
Other obligations(3)        223,370   223,370         -         -          -
----------------------------------------------------------------------------
Total commitments           767,115   259,071   337,030    19,582    151,432
----------------------------------------------------------------------------

1.  Operating leases relate to our vehicle fleet with terms ranging between
    1 and 5 years.
2.  Senior long-term debt is gross of transaction costs. Interest payments
    are not included.
3.  Other obligations is comprised primarily of accounts payable and accrued
    liability balances.

In 2013, Newalta contributed $1.2 million to the Enertech Partnership Agreement. Newalta is contingently committed to capital contributions up to a maximum of $7.0 million over the 10 year investment period. The investment is classified as held-for-trading and is recorded in other long-term assets.

SUMMARY OF QUARTERLY RESULTS


($000s except per share data)                         2013

                                           Q4         Q3        Q2        Q1
----------------------------------------------------------------------------
Revenue                               203,799    212,112   196,138   171,348
(Loss) earnings before taxes          (13,012)    19,064     6,697    15,145
Net (loss) earnings                   (10,322)    13,158     4,944    14,160
Earnings per share ($)                  (0.19)      0.24      0.09      0.26
Diluted earnings per share ($)          (0.19)      0.24      0.09      0.26
Adjusted net earnings                  11,532     20,417    11,894     5,753
Earnings per share ($) - adjusted        0.21       0.37      0.22      0.11
Weighted average shares - basic        55,205     55,077    54,928    54,512
Weighted average shares - diluted      55,756     55,700    55,400    55,246
EBITDA                                 28,733     44,447    38,331    29,060
Adjusted EBITDA                        32,795     51,199    38,350    27,721
----------------------------------------------------------------------------

($000s except per share data)                         2012

                                           Q4        Q3        Q2         Q1
----------------------------------------------------------------------------
Revenue                               198,445   190,136   171,130    166,498
(Loss) earnings before taxes            4,830    19,048    22,992      7,143
Net (loss) earnings                     4,124    15,236    18,626      4,819
Earnings per share ($)                   0.08      0.31      0.38       0.10
Diluted earnings per share ($)           0.08      0.31      0.38       0.10
Adjusted net earnings                   8,947    15,430     4,994     12,253
Earnings per share ($) - adjusted        0.17      0.32      0.10       0.28
Weighted average shares - basic        52,741    48,698    48,682     48,579
Weighted average shares - diluted      53,473    49,497    49,613     49,519
EBITDA                                 27,865    37,544    37,200     27,269
Adjusted EBITDA                        33,290    42,526    30,248     36,073
----------------------------------------------------------------------------

Quarterly performance is affected by, among other things, weather conditions, timing of onsite projects, the value of our products, foreign exchange rates, market demand and the timing of our growth capital investments as well as acquisitions and the contributions from those investments. Revenue from certain business units is impacted by seasonality. However, due to the diversity of our business, the impact is limited on a consolidated basis. For example, waste volumes received at our Oilfield facilities decline in the second quarter due to road bans which restrict drilling activity. This decline is offset by increased activity in our Eastern Industrial onsite business due to the aqueous nature of work performed, as well as potentially by fluctuations in the value of our products or event-based waste receipts at SCL.

Quarterly results over the last two years were impacted by fluctuations in the share price, which impacts the stock-based compensation expense, non-cash gains or losses on the embedded derivatives and by commodity prices, with weaker commodity prices having a larger impact on Q2 2012, Q4 2012, Q1 2013 and Q4 2013. The timing of our Heavy Oil contracts also impacted quarterly results, with lower contributions in the winter months as experienced in Q1 2013.

Quarterly revenue in 2012 grew, reflecting strong demand for our services. Compared to Q1, Q2 2012 net earnings increased significantly due to lower stock-based compensation expense and net finance charges. In Q2, Adjusted EBITDA was down due to the weaker commodity prices in the quarter and higher SG&A expenses. Q3 2012 revenue and Adjusted EBITDA increased from growth in New Markets. Adjusted EBITDA in Q4 decreased from Q3 2012 due to changes in commodity prices, reduced oilfield activity and higher stock-based compensation expense. Net earnings for the second half of 2012 decreased due to higher stock-based compensation expense.

Revenue and Adjusted EBITDA in Q1 2013 declined from Q4 2012 due to the impact of lower commodity pricing, timing of contracts and projects in New Markets, higher Adjusted SG&A expenses, offset by improved performance in Oilfield and VSC. Net earnings increased as a result of lower stock-based compensation expense, net finance charges and deferred income taxes. Revenue and Adjusted EBITDA in Q2 2013 increased from Q1 2013 primarily due to timing of contracts and projects in New Markets and improved performance in Oilfield. Net earnings decreased due to higher stock-based compensation expense, net finance charges related to a non-cash loss on embedded derivatives and deferred income taxes. Strong year-over-year performance continued in Q3 2013. Revenue and Adjusted EBITDA in Q3 increased from Q2 driven primarily by contributions from our growth capital investments in New Markets and higher event-based business at SCL. Net earnings increased due to improved performance, lower net finance charges related to a non-cash loss on embedded derivatives, partially offset by higher stock-based compensation and deferred income taxes. Q4 results were impacted by restructuring related impairment, non-recurring charges, weaker commodity prices, and the timing of Heavy Oil contracts.

SUMMARY OF SEGMENTED QUARTERLY FINANCIAL INFORMATION


                                        2013
($ millions)                            Year      Q4      Q3      Q2      Q1
----------------------------------------------------------------------------
New Markets
Revenue                                227.6    62.5    68.1    56.1    40.9
Gross profit                            75.2    17.7    25.1    19.3    13.0
Amortization (included in Cost of
 sales)                                 18.2     5.6     5.9     4.2     2.5
Divisional EBITDA(1)                    93.4    23.3    31.0    23.5    15.5
Assets employed(2)                     286.9   286.9   251.9   239.3   225.7
Recovered crude oil ('000 bbl)         268.9    64.5    69.5    71.5    63.6
----------------------------------------------------------------------------
Oilfield
Revenue                                184.6    47.5    49.0    39.5    48.6
Gross profit                            69.7    16.9    19.9    13.8    19.2
Amortization (included in Cost of
 sales)                                 12.4     3.3     3.1     3.0     3.0
Divisional EBITDA(1)                    82.1    20.2    23.0    16.8    22.2
Assets employed(2)                     384.7   384.7   364.0   360.1   354.8
Recovered crude oil ('000 bbl)         289.3    71.5    69.4    70.2    78.2
----------------------------------------------------------------------------
Industrial
Revenue                                371.2    93.8    95.1   100.5    81.9
Gross profit                            43.7    11.5    14.2    12.3     5.6
Amortization (included in Cost of
 sales)                                 21.7     3.7     5.5     6.9     5.6
Divisional EBITDA(1)                    65.3    15.3    19.6    19.2    11.2
Assets employed(2)                     407.8   407.8   429.2   427.0   428.8
VSC Volume ('000s MT)                   68.7    19.2    15.6    17.4    16.5
SCL Volume Collected ('000s MT)        731.8   113.4   273.6   226.6   118.2
Base Oil (millions of litres)           18.5     4.6     4.9     5.1     3.9
----------------------------------------------------------------------------

                                        2012
($ millions)                            Year      Q4      Q3      Q2      Q1
----------------------------------------------------------------------------
New Markets
Revenue                                188.8    52.5    61.6    38.6    36.1
Gross profit                            67.8    17.1    22.5    14.0    14.2
Amortization (included in Cost of
 sales)                                 12.3     4.4     3.4     2.3     2.1
Divisional EBITDA(1)                    80.1    21.5    26.0    16.3    16.3
Assets employed(2)                     221.5   221.5   204.0   201.6   174.5
Recovered crude oil ('000 bbl)         215.9    55.0    51.1    56.1    53.6
----------------------------------------------------------------------------
Oilfield
Revenue                                181.1    44.5    47.2    39.0    50.5
Gross profit                            61.5    14.8    16.7    10.5    19.5
Amortization (included in Cost of
 sales)                                 12.0     3.1     3.0     2.7     3.2
Divisional EBITDA(1)                    73.5    17.9    19.7    13.2    22.7
Assets employed(2)                     350.7   350.7   344.2   338.0   333.8
Recovered crude oil ('000 bbl)         266.9    76.3    61.8    57.8    71.0
----------------------------------------------------------------------------
Industrial
Revenue                                356.3   101.4    81.4    93.6    79.9
Gross profit                            40.5     7.1     9.7    14.4     9.2
Amortization (included in Cost of
 sales)                                 24.8     6.8     5.9     6.0     6.1
Divisional EBITDA(1)                    65.3    13.9    15.6    20.4    15.3
Assets employed(2)                     428.4   428.4   425.0   422.1   421.4
VSC Volume ('000s MT)                   64.7    17.6    12.1    17.6    17.4
SCL Volume Collected ('000s MT)        750.0   228.3   155.3   170.5   195.9
Base Oil (millions of litres)           17.8     4.2     4.7     4.4     4.5
----------------------------------------------------------------------------

1.  "Divisional EBITDA" is a measure of the division's profitability and an
    indication of the results generated by the division's principal business
    activities prior to how the assets are amortized. Divisional EBITDA is
    the sum of gross profit and amortization.
2.  "Assets employed" is provided to assist management and investors in
    determining the effectiveness of the use of the assets at a divisional
    level. Assets employed is the sum of capital assets, intangible assets
    and goodwill allocated to each division. 2012 and 2013 information has
    been restated to conform to current presentation.

SUPPLEMENTARY INFORMATION - NON-RECURRING CHARGES


                                      Three months ended          Year ended
                                            December 31,        December 31,
($millions)                                         2013                2013
----------------------------------------------------------------------------
Charges for positions eliminated
 during the year                                     0.2                 1.6
Settlement of an out of period
 disputed account                                    0.6                 2.1
DOL settlement(1)
  DOL settlement charged to New
   Markets                                           1.5                   -
  DOL settlement charged to SG&A                     2.2                 2.2
----------------------------------------------------------------------------
Total non-recurring charges                          4.5                 5.9
----------------------------------------------------------------------------

1.  In Q4 2013, we recognized $4.2 million as a result of the DOL
    settlement. $2.2 million related to prior years and was charged to SG&A.
    $2.0 million was charged to New Markets for 2013 compensation, of which
    $1.5 million related to the first 9 months of 2013.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements.

SENSITIVITIES

Our revenue is sensitive to changes in commodity prices for crude oil, base oils and lead. The direct impact of these commodity prices is reflected in the revenue received from the sale of products such as crude oil, base oils and lead. Approximately 20% of our revenue is sensitive to direct impact of commodity prices.

Our results are also impacted by drilling activity. Drilling sensitivities are impacted by the area in which drilling occurs compared to areas which we operate and the drilling techniques employed. Where possible, we actively manage these impacts by strategically geographically balancing mobile assets to meet demand and shifts in activity levels where necessary.

The following table provides management's estimates of fluctuations in key inputs and prices and the direct impact on revenue from product sales and SG&A:


----------------------------------------------------------------------------
                                                                   Impact on
                                                                      Annual
                                                  Change in          Revenue
                                                  benchmark           ($)(1)
----------------------------------------------------------------------------
LME lead price ($U.S./MT)(2)                            110      3.5 million
Edmonton Par crude oil price ($/bbl)                   1.00      0.4 million
WCS ($/bbl)                                            1.00      0.3 million
Metres drilled (million metres)                        1.00      1.8 million
Active rigs in WCSB                                 10 rigs      0.3 million
Motiva Base oil ($/litre)                              0.01      0.2 million
----------------------------------------------------------------------------

1.  Based on 2013 performance and volumes and are approximations and used to
    support our strategy outlined in the Strategy section.
2.  Excludes impact of LME on feedstock which offsets the impact of LME on
    revenue.

Our stock-based compensation expense is sensitive to changes in our share price. At December 31, 2013, a $1 change in our share price between $15 per share and $20 per share has a $1.2 - $1.5 million direct impact on annual stock-based compensation reflected in SG&A. We anticipate that approximately 45% of stock-based compensation will be settled in cash in future periods.

RISK MANAGEMENT

To effectively manage the risk associated with our business and strategic objectives, our risk management approach continues to evolve. Our approach provides the framework to understand and address risks faced by our organization. Risk categories identified include:


--  Strategic - risk to earnings, capital, and strategic objectives arising
    due to changes in the business environment

--  Operational - risk of loss due to failed internal processes and systems,
    human and technical errors, or external events

--  Financial - risk associated with financial processes, obligations, and
    assets

--  People - risk to Business Plan due to recruiting, training, labour
    availability, union relations, and managerial structure

--  Legal/Regulatory - risk of loss due to compliance with laws, ethical
    standards, and contractual obligations

--  Technology and Data - risk that IT systems are not adequate to support
    strategic and business objectives

CRITICAL ACCOUNTING ESTIMATES

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period. Such estimates relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts as transactions are settled in the future. Amounts recorded for amortization, accretion, future decommissioning obligations, embedded derivatives, deferred income taxes, valuation of warrants and impairment calculations are based on estimates. By their nature, these estimates are subject to measurement uncertainty, and the impact of the difference between the actual and the estimated costs on the financial statements of future periods could be material.

RECOVERABILITY OF ASSET CARRYING VALUES

Newalta assesses its property, plant and equipment, intangibles and goodwill for impairment at the asset level and the cash generating unit ("CGU") level by comparing the carrying values of the assets or CGUs being tested with their recoverable amounts. The recoverable amounts are the greater of the assets' or CGUs' values in use or their fair values less costs to sell.

The carrying values of all assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Events or changes in circumstances include items such as: significant changes in the manner in which an asset is used, including plans to restructure the operation to which an asset belongs, or plans to dispose of an asset before the previously expected date. The carrying values of our CGUs are tested annually for impairment. Judgment is required in the aggregation of assets into CGU's.

The determination of the recoverable amount involves estimating the assets or CGU's fair value less costs to sell or its value-in-use, which is based on its discounted future cash flows using an applicable discount rate. Future cash flows are calculated based on management's best estimate of future inflation and are discounted based on management's current assessment of market conditions.

In December 2013, we announced our intention to streamline resources in the Industrial division through a rationalization of business lines and facilities in 2014. As a result of this initiative, we assessed the recoverable amount for certain assets directly impacted by this initiative to be lower than their carrying value and recognized $21.2 million for restructuring related impairment in Q4 2013.

The pre-tax asset impairment charge recognized in the Industrial division was allocated as follows:


----------------------------------------------------------------------------
                                                        December 31, 2013(1)
----------------------------------------------------------------------------
Property, plant and equipment                                          7,599
Intangible assets                                                      5,849
Goodwill                                                               7,750
----------------------------------------------------------------------------
                                                                      21,198
----------------------------------------------------------------------------

1.  The total asset impairment charge contains $5.5 million which relates to
    assets which have been classified as held for sale at December 31, 2013.

As at December 31, 2012, there was no impairment.

DECOMMISSIONING LIABILITY

Newalta recognizes a provision for future remediation and post abandonment activities in the consolidated financial statements as the net present value of the estimated future expenditures required to settle the estimated future obligation at the balance sheet date. The recorded liability increases over time to its future amount through unwinding of the discount. The measurement of the decommissioning liability involves the use of estimates and assumptions including the discount rate, the expected timing of future expenditures and the amount of future abandonment costs. Decommissioning estimates are reviewed annually and estimated by management, in consultation with Newalta's engineers and environmental, health and safety staff, on the basis of current regulations, costs, technology and industry standards.

Revisions to the estimated amount or timing of the obligations are reflected prospectively as increases or decreases to the recorded liability and the related asset. Actual decommissioning expenditures, up to the recorded liability at the time, are drawn against the liability as the costs are incurred. Amounts capitalized to the related assets are amortized to income in line with the depreciation of the underlying asset.

FAIR VALUE CALCULATION ON SHARE-BASED PAYMENTS AND SHARE APPRECIATION RIGHTS

We have one share-based compensation plan (the "Option Plan"). Under the Option Plan, we may grant to directors, officers, employees and consultants of Newalta or any of its affiliates, options to acquire up to 10% of the issued and outstanding shares of Newalta.

The fair value of share-based payments is calculated using a Black-Scholes option pricing model, depending on the characteristics of the share-based payment. There are a number of estimates used in the calculation such as the future forfeiture rate, expected option life and the future price volatility of the underlying security which can vary from actual future events. The factors applied in the calculation are management's best estimates based on historical information and future forecasts.

We may also grant share appreciation rights ("SARs") to directors, officers, employees and consultants of Newalta or any of its affiliates. SARs entitle the holder thereof to receive cash from Newalta in an amount equal to the positive difference between the grant price and the trading price of our common shares on the exercise date. The grant price is calculated based on the five-day volume weighted average trading price of our common shares on the TSX.

The fair value at the date of grant is calculated using the Black-Scholes option pricing model method with the share-based compensation expense recognized over the vesting period of the options. There are a number of estimates used in the calculation such as the future forfeiture rate, expected option life and the future price volatility of the underlying security which can vary from actual future events. The factors applied in the calculation are management's best estimates based on historical information and future forecasts.

TAXATION

The calculation of deferred income taxes is based on a number of assumptions including estimating the future periods in which temporary differences, tax losses and other tax credits will reverse. Tax interpretations, regulations and legislation in the various jurisdictions in which we operate are subject to change.

DERIVATIVE INSTRUMENTS

The estimated fair value of derivative instruments resulting in financial assets and liabilities, by their very nature, are subject to measurement uncertainty.

LEASES

Newalta makes judgments in determining whether certain leases, in particular those with long contractual terms where the lessee is the sole user and Newalta is the lessor, are operating or finance leases.

REVENUE

Newalta may enter into arrangements with customers which contain multiple elements in which revenue is recognized for each unit of accounting when earned based on the relative fair value of each unit of accounting as determined by internal or third party analyses of market-based prices. Significant judgment is required to allocate contract consideration to each unit of accounting and determine whether the arrangement is a single unit of accounting or a multiple element arrangement. Depending upon how such judgment is exercised, the timing and amount of revenue recognized could differ significantly.

ACCOUNTING POLICY CHANGES

We adopted the following standards for the first time in the financial year beginning January 1, 2013. There have been no material impacts upon adoption:


--  IFRS 10, "Consolidated Financial Statements"
--  IFRS 11, "Joint Arrangements"
--  IFRS 12, "Disclosure of Interests in Other Entities"
--  IFRS 13, "Fair Value Measurement"

BUSINESS RISKS AND RISK MANAGEMENT

Our business is subject to certain risks and uncertainties. Prior to making any investment decision regarding Newalta, investors should carefully consider, among other things, the risks described herein (including the risks and uncertainties listed on the front page of this MD&A and throughout this MD&A) and the risk factors set forth in the most recently filed Annual Information Form of Newalta which are incorporated by reference herein. For further information on our risk management framework, please refer to the section on Risk Management.

The Annual Information Form is available through the internet on the Canadian System for Electronic Document Analysis and Retrieval ("SEDAR") which can be accessed at www.sedar.com. Copies of the Annual Information Form may be obtained, on request without charge, from Newalta Corporation at 211 - 11th Avenue S.W., Calgary, Alberta T2R 0C6, or by facsimile at (403) 806-7032.

FINANCIAL AND OTHER INSTRUMENTS

The carrying values of accounts receivable and accounts payable approximate the fair value of these financial instruments due to their short term maturities. Our credit risk from our customers is mitigated by our broad customer base and diverse product lines. Historically, on an annual basis, our top 25 customers generate approximately 45% of our total revenue, with 10% of these customers having a credit rating of A or higher and 55% of these customers having ratings of BBB or higher. In the normal course of operations, we are exposed to movements in U.S. dollar exchange rates relative to the Canadian dollar. The foreign exchange risk arises primarily from U.S. dollar denominated long-term debt and working capital. We have not entered into any financial derivatives to manage the risk for the foreign currency exposure as at December 31, 2013. Management assesses our working capital foreign exchange exposure regularly and may draw U.S. denominated long-term debt as required, which serves as a natural hedge, to mitigate our balance sheet exposure. The floating interest rate profile of our long-term debt exposes us to interest rate risk. We do not use hedging instruments to mitigate this risk. The carrying value of the senior secured long-term debt approximates fair value due to its floating interest rates. For further information regarding our financial and other instruments, please refer to Note 18 to the Financial Statements in our Annual Report for the year ended December 31, 2013.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

The Chief Executive Officer and the Chief Financial Officer (collectively the "Certifying Officers") have evaluated the design and effectiveness of our disclosure controls and procedures and our internal controls over financial reporting using the Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As of December 31, 2013, the Certifying Officers have concluded that such disclosure controls and procedures and internal controls over financial reporting were effective. There have not been any changes in the internal control over financial reporting in Q4 of 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ADDITIONAL INFORMATION

Additional information relating to Newalta, including the Annual Information Form, is available through the internet on the SEDAR, which can be accessed at www.sedar.com. Copies of the Annual Information Form of Newalta may be obtained from Newalta Corporation on the internet at www.newalta.com, by mail at 211 - 11th Avenue S.W., Calgary, Alberta T2R 0C6, or by facsimile at (403) 806-7032.



CONSOLIDATED BALANCE SHEETS
(Unaudited - expressed in thousands of Canadian Dollars)
                                                December 31,   December 31,
                                                        2013           2012
----------------------------------------------------------------------------
Assets
Current assets
  Cash                                                     -            409
  Accounts and other receivables (Note 17)           148,998        150,347
  Inventories (Note 3)                                57,037         43,123
  Prepaid expenses and other assets (Note 4)          16,891         10,468
----------------------------------------------------------------------------
                                                     222,926        204,347
Non-current assets
  Property, plant and equipment (Note 4)           1,011,921        929,580
  Permits and other intangible assets (Note
   5)                                                 52,595         58,614
  Other long-term assets (Note 6)                     24,632         23,602
  Goodwill (Note 5)                                   96,167        102,615
----------------------------------------------------------------------------
TOTAL ASSETS                                       1,408,241      1,318,758
----------------------------------------------------------------------------
Liabilities
  Current liabilities
  Bank indebtedness                                    1,321              -
  Accounts payable and accrued liabilities           217,283        188,370
  Dividends payable (Note 15)                          6,087          5,426
----------------------------------------------------------------------------
                                                     224,691        193,796
Non-current liabilities
  Senior secured debt (Note 7)                       117,136         76,500
  Senior unsecured debentures (Note 8)               246,970        246,334
  Other liabilities (Note 9)                           2,537          4,228
  Deferred tax liability (Note 10)                    80,646         77,519
  Decommissioning liability (Note 11)                 61,099         78,941
----------------------------------------------------------------------------
TOTAL LIABILITIES                                    733,079        677,318
----------------------------------------------------------------------------
Shareholders' Equity
Shareholders' capital (Note 12)                      409,894        394,048
Contributed surplus                                   15,251          2,881
Retained earnings                                    245,834        247,565
Accumulated other comprehensive income (loss)          4,183         (3,054)
----------------------------------------------------------------------------
TOTAL EQUITY                                         675,162        641,440
----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         1,408,241      1,318,758
----------------------------------------------------------------------------

The accompanying notes to the financial statements are an integral component
of the financial statements.



CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - expressed in thousands of Canadian Dollars)
(Except per share data)
                                 For the three months         For the year
                                   ended December 31,    ended December 31,
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Revenue                            203,799    198,445    783,396    726,209
Cost of sales                      157,704    159,408    594,858    556,451
----------------------------------------------------------------------------
Gross profit                        46,095     39,037    188,538    169,758
----------------------------------------------------------------------------
  Selling, general and
   administrative                   34,046     28,969    114,965    102,389
  Restructuring related
   impairment (Note 4)              21,198          -     21,198          -
----------------------------------------------------------------------------
(Loss) earnings before finance
 charges and income taxes           (9,149)    10,068     52,375     67,369
----------------------------------------------------------------------------
  Finance charges (Note 18)          7,269      5,840     27,517     26,796
  Embedded derivative gain (Note
   17)                              (3,406)      (602)    (3,036)   (13,439)
----------------------------------------------------------------------------
Net financing charges expense        3,863      5,238     24,481     13,357
----------------------------------------------------------------------------
(Loss) earnings before income
 taxes                             (13,012)     4,830     27,894     54,012
----------------------------------------------------------------------------
Income tax (recovery) expense
 (Note 10)                          (2,690)       706      5,954     11,208
----------------------------------------------------------------------------
Net (loss) earnings                (10,322)     4,124     21,940     42,804
----------------------------------------------------------------------------
Net (loss) earnings per share
 (Note 14)                           (0.19)      0.08       0.40       0.86
Diluted (loss) earnings per
 share (Note 14)                     (0.19)      0.08       0.40       0.85
----------------------------------------------------------------------------

Supplementary information:
Amortization included in cost of
 sales                              12,711     14,271     52,259     49,024
Amortization included in
 selling, general and
 administrative                      3,973      3,526     14,738     13,485
----------------------------------------------------------------------------
Total amortization                  16,684     17,797     66,997     62,509
----------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - expressed in thousands of Canadian Dollars)
                                          For the three
                                           months ended        For the year
                                           December 31,  ended December 31,
                                         2013      2012      2013      2012
----------------------------------------------------------------------------
Net (loss) earnings                   (10,322)    4,124    21,940    42,804
Other comprehensive income (loss):
  Exchange difference on translating
   foreign operations                   3,810     1,340     7,523    (2,678)
  Unrealized loss on available for
   sale financial assets                 (127)      (64)     (286)     (159)
  Transfer of available for sale
   financial assets to financing
   charges                                  -        70         -     1,627
----------------------------------------------------------------------------
Other comprehensive income (loss)       3,683     1,346     7,237    (1,210)
----------------------------------------------------------------------------
Comprehensive income                   (6,639)    5,470    29,177    41,594
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes to the financial statements are an integral component
of the financial statements.



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited - expressed in thousands of Canadian Dollars)
                                                       Accumulated
                                                             other
                 Shareholders'                       comprehensive
                       capital  Contributed Retained        income
                     (Note 12)      surplus earnings        (loss)    Total
----------------------------------------------------------------------------
Balance, December
 31, 2011              317,386        2,700  223,679        (1,844) 541,921
----------------------------------------------------------------------------
Changes in equity
 for year ended
 December 31,
 2012
Exercise of
 options                 2,443            -        -             -    2,443
Issuance of
 shares                 74,400            -        -             -   74,400
Cancellation of
 shares                   (181)         181        -             -        -
Dividends
 declared                    -            -  (18,918)            -  (18,918)
Other
 comprehensive
 loss                        -            -        -        (1,210)  (1,210)
Net earnings for
 the year                    -            -   42,804             -   42,804
----------------------------------------------------------------------------
Balance, December
 31, 2012              394,048        2,881  247,565        (3,054) 641,440
----------------------------------------------------------------------------
Changes in equity
 for year ended
 December 31,
 2013
Expense related
 to vesting of
 options                     -          235        -             -      235
Reclassification
 of equity
 settled options
 (Note 9)                    -       12,598        -             -   12,598
Exercise of
 options                10,634         (463)       -             -   10,171
Issuance of
 shares                  5,212            -        -             -    5,212
Dividends
 declared                    -            -  (23,671)            -  (23,671)
Other
 comprehensive
 income                      -            -        -         7,237    7,237
Net earnings for
 the year                    -            -   21,940             -   21,940
----------------------------------------------------------------------------
Balance, December
 31, 2013              409,894       15,251  245,834         4,183  675,162
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes to the financial statements are an integral component
of the financial statements.



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - expressed in thousands of Canadian Dollars)
                                 For the three months          For the year
                                   ended December 31,    ended December 31,
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Cash provided by (used for):
Operating Activities
Net (loss) earnings                (10,322)     4,124     21,940     42,804
Adjustments for:
  Amortization                      16,684     17,797     66,997     62,509
  Restructuring related
   impairment (Note 4)              21,198          -     21,198          -
  Income taxes expense (Note 10)    (2,690)       706      5,954     11,208
  Income taxes (paid) recovered       (110)      (188)        11       (231)
  Non-cash stock-based
   compensation expense (Note 9)     2,032      4,455      3,149      8,955
  Net financing charges              3,863      5,238     24,481     13,357
  Finance charges paid             (11,158)   (10,343)   (24,095)   (22,075)
  Other                                349        514        893         89
----------------------------------------------------------------------------
Funds from Operations               19,846     22,303    120,528    116,616
Decrease (increase) in non-cash
 working capital (Note 21)          27,078     26,842      8,333    (15,619)
Decommissioning costs incurred
 (Note 11)                          (1,308)    (1,683)    (5,287)    (3,554)
----------------------------------------------------------------------------
Cash from Operating Activities      45,616     47,462    123,574     97,443
----------------------------------------------------------------------------
Investing Activities
  Additions to property, plant
   and equipment (Note 21)         (38,191)   (48,616)  (151,860)  (157,669)
  Proceeds on sale of property,
   plant, and equipment                361      1,925      2,424      2,573
  Other                                 37          -     (3,540)       100
----------------------------------------------------------------------------
Cash used in Investing
 Activities                        (37,793)   (46,691)  (152,976)  (154,996)
----------------------------------------------------------------------------
Financing Activities
  Issuance of shares                 1,400     73,920      3,761     74,562
  (Decrease) increase in senior
   secured debt                     (2,364)   (71,000)    40,636      7,496
  (Decrease) increase in bank
   indebtedness                     (2,355)         -      1,321     (6,168)
  Dividends paid                    (4,862)    (4,870)   (17,799)   (17,382)
----------------------------------------------------------------------------
Cash (used in) from Financing
 Activities                         (8,181)    (1,950)    27,919     58,508
----------------------------------------------------------------------------
Effect of foreign exchange on
 cash                                  358        311      1,074       (546)
----------------------------------------------------------------------------
Change in cash                           -       (868)      (409)       409
Cash, beginning of period                -      1,277        409          -
----------------------------------------------------------------------------
Cash, end of period                      -        409          -        409
----------------------------------------------------------------------------

The accompanying notes to the financial statements are an integral component
of the financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the three months and years ended December 31, 2013 and 2012.

(Unaudited - all tabular data in thousands of Canadian Dollars except per share and ratio data)

NOTE 1. CORPORATE STRUCTURE

Newalta Corporation (the "Corporation" or "Newalta") was incorporated on October 29, 2008, pursuant to the laws of the Province of Alberta. Newalta completed an internal reorganization resulting in a name change from Newalta Inc. to Newalta Corporation effective January 1, 2010. Newalta provides cost-effective solutions to industrial customers to improve their environmental performance with a focus on recycling and recovery of products from industrial residues. These services are provided both through our network of facilities across Canada and at our customers' facilities where we mobilize our equipment and people to process material directly onsite. Our customers operate in a broad range of industries including oil and gas, petrochemical, refining, lead, manufacturing and mining industries.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

STATEMENT OF COMPLIANCE

These consolidated financial statements ("Financial Statements") were prepared in accordance with International Financial Reporting Standards ("IFRS") and include the accounts of Newalta and its wholly-owned subsidiaries. All intercompany balances and transactions including revenue and expenses were eliminated.

These financial statements were approved by the Board of Directors on February 20, 2014.

Critical judgments and estimate uncertainties in applying accounting policies

The preparation of the financial statements in conformity with IFRS requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expense for the period. Such estimates relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts as transactions are settled in the future. Estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are applied prospectively.

(i) The following are the critical judgments that management made in applying Newalta's accounting policies and that have the most significant effect on the amounts recognized in the financial statements.


--  Determining components under multiple element revenue agreements;
--  Determining whether agreements not in the legal form of a lease, contain
    a lease;
--  Determining whether certain leases, are operating or finance leases;
--  Determining the aggregation of assets into cash generating units
    ("CGUs");
--  Determining key assumptions for impairment testing;
--  Determining the existence of contingent liabilities or whether an
    outflow of resources is probable and this needs to be accounted for as a
    provision;

(ii) The following sections contain critical estimates and assumptions with the most significant effect on amounts recognized in the financial statements. They are discussed further in the accounting policies that follow.


--  Revenue (Note 2k)
--  Recoverability of asset carrying values for impairment testing purposes
    (Note 2i and 5)
--  Fair value determination of stock-based payments (Note 2o and 9)
--  Income Tax (Note 2m and 10)
--  Decommissioning liability (Note 2j and 11)
--  Derivative instruments (Note 2p and 17)

BASIS OF PREPARATION

The financial statements were prepared on the historical cost basis except for certain financial instruments that are measured at fair value, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below.

a) Cash

Cash is defined as cash and short-term deposits with maturities of three months or less, when purchased.

b) Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount is reported on the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

c) Inventories

Inventories are comprised of oil, lead and other recycled products, spare parts and supplies, and are recorded at the lower of cost and net realizable value. Inventories are valued using the weighted average costing method. Cost of finished goods includes the laid down cost of materials plus the cost of direct labour applied to the product and the applicable share of overhead expense. Cost of other items of inventories comprise the laid down cost.

d) Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated amortization and impairment. Amortization rates are calculated to amortize the costs, net of residual value, over the assets' estimated useful lives. Significant parts of property, plant and equipment that have different depreciable lives are amortized separately.

Plant and equipment is principally depreciated at rates of 5-10% of the declining balance (buildings, site improvements, tanks and mobile equipment) or from 5-14 years straight line (vehicles, computer hardware and software and leasehold improvements), depending on the expected life of the asset. Some equipment is depreciated based on utilization rates. The utilization rate is determined by dividing the cost of the asset by the estimated future hours of service. Residual values, up to 20% of original cost, may be established for buildings, site improvements, and onsite equipment. These residual values are not depreciated. The estimated useful lives, residual values and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Landfill assets represent the costs of landfill available space, including original acquisition cost, incurred landfill construction and development costs, including leachate collection systems installed during the operating life of the site, and capitalized landfill closure and post-closure costs. The cost of landfill assets, together with projected landfill construction and development costs for permitted capacity plus unpermitted capacity that management believes is probable of ultimately being permitted, is amortized on a per-unit basis as landfill space is consumed. The impact on annual amortization expense of changes in estimated capacity and construction costs is accounted for prospectively. Management annually updates landfill capacity estimates which include permitted and unpermitted but probable capacities. Estimates are based on survey information provided by independent engineers, and projected landfill construction and development costs.

Newalta applies the following criteria for evaluating the probability of obtaining a permit for additional capacity, which provides management with a basis to evaluate the likelihood of success of unpermitted expansions:


--  Management has submitted the application and expects to receive all
    necessary approvals to accept waste.
--  At the time the expansion is included in Newalta's estimate of the
    landfill's useful economic life, it is probable that the required
    approvals will be received within the normal application and processing
    time periods for approvals in the jurisdiction in which the landfill is
    located.
--  Additional capacity and related additional costs, including permitting,
    final closure and post-closure costs, were estimated based on the
    conceptual design of the proposed expansion.

e) Permits and other intangible assets

Permits and other intangible assets are stated at cost, less accumulated amortization and impairment, and consist of certain production processes, trademarks, permits and agreements which are amortized over the period of the contractual benefit of 8 to 30 years on a straight line basis. Certain permits are deemed to have indefinite lives and therefore are not amortized. There are nominal fees to renew these permits provided that Newalta remains in good standing with regulatory authorities.

f) Assets held for sale

Non-current assets are classified as assets held for sale, and are reported in prepaid and other assets on the balance sheet, when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use, and a sale is considered highly probable. Assets held for sale are stated at the lower of net book value and fair value less costs to sell. Once classified as held for sale, amortization is no longer recorded on the assets.

g) Leases

Lessee

All of Newalta's leases are classified as operating leases therefore the leased assets are not recognized in Newalta's consolidated balance sheets. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease unless another systematic basis is representative of the time pattern of Newalta's benefit, including any rent-free periods. Lease incentives are recognized as an integral part of the total lease expense, over the term of the lease.

Leases may include additional payments for real estate taxes, maintenance and insurance. These amounts are expensed in the period to which they relate.

Lessor

Assets subject to operating leases are recognized and classified according to the nature of the leased asset. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and expensed over the lease term on the same basis as the lease income. The depreciation policy for leased assets is consistent with the depreciation policy for similar owned assets.

h) Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets of acquired businesses.

i) Impairment

Impairment testing compares the carrying values of the assets or CGUs being tested with their recoverable amounts (recoverable amounts being the greater of the assets' or CGUs' values in use or their fair values less costs to sell). Value in use is assessed using the present value of the expected future cash flows of the relevant asset. When it is not possible to estimate the recoverable amount of an individual asset, the asset is tested as part of a CGU, which 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. The key assumptions for the value in use calculation include discount and growth rate estimates of the risks associated with the projected cash flows based on the best information available as of the date of the impairment test. The weighted average growth rates reflect a nominal inflationary rate as required by IFRS that is calculated over the remaining useful life of each asset or CGU. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs.

Impairment losses are immediately recognized to the extent that the asset or CGU carrying values exceed their recoverable amounts. Should the recoverable amounts for previously impaired assets or CGUs subsequently increase, the impairment losses previously recognized (other than in respect of goodwill) may be reversed to the extent that the reversal is not a result of "unwinding of discount" and that the resulting carrying value does not exceed the carrying value that would have been the result if no impairment losses had been previously recognized.

Asset impairment

The carrying values of all assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Events or changes in circumstances include items such as: significant changes in the manner in which an asset is used, including plans to restructure the operation to which an asset belongs, or plans to dispose of an asset before the previously expected date.

CGU impairment

The carrying values of Newalta's CGUs are tested annually for impairment. For the purpose of impairment testing, goodwill is allocated to CGUs expected to benefit from the business combination in which the goodwill arose. To the extent that the carrying amount of a CGU exceeds its recoverable amount, the excess would first reduce the carrying value of goodwill and any remainder would reduce the carrying values of the long-term assets of the CGUs on a pro-rated basis.

Management has determined that Newalta's CGUs are: Industrial West business unit, Industrial East business unit, Ville Ste-Catherine ("VSC") business unit, Oilfield division, Heavy Oil business unit and United States ("U.S.") business unit.

j) Provisions

Provisions are recognized when Newalta has a present obligation (legal or constructive) as a result of a past event, it is probable that Newalta will be required to settle the obligation, and a reliable estimate can be made of the amount of that obligation.

Decommissioning liabilities

Newalta provides for estimated future decommissioning costs for all its facilities based on the useful lives of the assets and the long-term commitments of certain sites. Over this period, Newalta recognizes the liability for the future decommissioning liabilities associated with property, plant and equipment. These obligations are initially measured at the discounted future value of the liability. This value is capitalized as part of the cost of the related asset and amortized over the asset's useful life. The balance of the liability is adjusted each period for the unwinding of the discount, with the associated expense included within finance charges. Decommissioning costs and timing are estimated by management, in consultation with Newalta's engineers and environmental, health and safety staff, on the basis of current regulations, costs, technology and industry standards. Other key estimates include discount and inflation rates. Actual decommissioning costs are charged against the provision as incurred.

k) Revenue recognition

Revenue is recognized when the significant risks and rewards of ownership of the goods and/or delivery of services have transferred to the buyer, recoverability of consideration is probable, the amount of revenue can be measured reliably, Newalta retains no continuing managerial involvement with the goods, and the costs required to complete the contract can be estimated reliably. Revenue is measured net of returns and trade discounts.

Newalta offers individual services, products and integrated solutions to meet customer needs. Integrated solutions may involve the delivery of multiple services and products occurring in different reporting periods. As appropriate, these multiple element arrangements are separated into components and consideration is allocated based upon their relative fair values.

Individual and integrated solutions may include one or more of the following:

(i) Sale of Services

Newalta's waste processing services are generally sold based upon service orders or contracts with a customer that include fixed or determinable prices based upon hourly, daily, or throughput rates. Revenue is recognized when services are rendered.

(ii) Sale of Products

Revenue from Newalta's sale of recycled and recovered waste products is recognized when products are delivered to customers or pipelines.

(iii) Construction Contracts

Construction contract revenue results from some of Newalta's onsite projects. Construction revenue includes the initial amount negotiated in the contract plus any change in terms of scope of work performed. If costs can be measured reliably, revenue is recognized based on the stage of completion of the contract, determined by the physical portion of work performed. Otherwise, construction revenue will be recognized to the extent contract costs are likely to be recovered.

(iv) Operating Leases

Operating lease revenue is derived from some of Newalta's onsite projects. Lease accounting is applied to a component of a contract if it conveys the right of use of a specific asset to a customer but does not convey the risks and/or benefits of ownership. Revenue from operating leases is recognized over the processing period.

l) Research and development

Research and development costs are incurred in the design, testing and commercialization of Newalta's products and services. Research costs, other than capital expenditures, are expensed as incurred. The costs incurred in developing new technologies are expensed as incurred unless they meet the criteria under IFRS for deferral and amortization. These costs will be amortized over the estimated useful life of the product, commencing with commercial production. In the event that a product program for which costs were deferred is modified or cancelled, Newalta will assess the recoverability of the deferred costs and if considered unrecoverable, will expense the costs in the period the assessment is made.

m) Income Tax

Tax expense comprises current and deferred tax. Tax is recognized in the statements of operations, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

Newalta and its wholly-owned subsidiaries follow the liability method of accounting for income taxes. Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Deferred income tax assets and liabilities are measured based upon temporary differences between the carrying values of assets and liabilities and their tax base. Deferred income tax expense is computed based on the change during the year in the deferred income tax assets and liabilities. Effects of changes in tax laws and tax rates are recognized when substantively enacted.

Deferred tax assets are also recognized for the benefits from tax losses and deductions with no accounting basis, provided those benefits are probable to be realized. Deferred income tax assets and liabilities are determined based on the tax laws and rates that are anticipated to apply in the period of estimated realization.

n) Earnings per share

Basic earnings per share is calculated using the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated by adding the weighted average number of shares outstanding during the year to the additional shares that would have been outstanding if potentially dilutive shares had been issued, using the "treasury stock" method.

o) Stock-based incentive plans

The Corporation's stock-based incentive plans consist of stock options, stock appreciation rights and share units, and are granted to executives, employees and non-employee directors.

Stock options

Newalta has one active stock-based option incentive plan (the "Option Plan"). Under the Option Plan, Newalta may grant to directors, officers, employees and consultants of Newalta or any of its affiliates, rights to acquire up to 10% of the issued and outstanding common shares of the Corporation (the "Shares").

In December 2013, the Board of Directors modified the Option Plan to eliminate the ability for option holders to settle options for cash. As a result of this change, the stock based compensation liability relating to stock options was reclassified to contributed surplus.

The Option Plan is equity settled. The fair value of options at the date of grant is calculated using the Black-Scholes option pricing model method with the stock-based compensation expense recorded as a selling, general and administrative expense ("SG&A") that is recognized over the vesting period of the options, with a corresponding increase to contributed surplus. When options are exercised, the proceeds, together with the amount recorded in contributed surplus, are transferred to shareholders' capital. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

Stock appreciation rights ("SARs")

SARs entitle the holder to receive cash from Newalta in an amount equal to the positive difference between the grant price and the trading price of the Shares on the exercise date. The grant price is calculated based on the five-day volume weighted average trading price of the Shares on the Toronto Stock Exchange. SARs generally expire five years after they are granted and the vesting period is determined by the Board of Directors of Newalta. The fair value at the date of grant is calculated using the Black-Scholes option pricing model method with the stock-based compensation expense recognized over the vesting period of the options and recorded as SG&A with a corresponding entry to accrued liabilities or other liabilities. The fair value is subsequently re-measured at the end of each reporting period. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

Share units

Newalta has a cash-settled Deferred Share Unit ("DSU") plan that exists for non-executive directors. Under this plan, notional DSUs are granted annually and vest immediately. The measurement of the compensation expense and corresponding liability for these awards is based on the fair value of the award, and is recognized as a stock-based compensation expense which is recorded as a SG&A with a corresponding increase in accrued liabilities. Dividend equivalent grants, if any, are recorded as stock-based compensation expense in the period the dividend is paid. The liability is re-measured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in earnings. Each DSU entitles the holder to receive a cash payment equal to the five-day volume weighted average trading price of the Shares preceding the date of redemption. The DSUs may only be redeemed within the period beginning on the date a holder ceases to be a participant under the plan and ending on December 31 of the following calendar year.

A cash-settled Performance Share Unit ("PSU") plan has been established for officers and other eligible employees. Under this plan, notional PSUs are granted based on corporate performance criterion and vest no later than December 31 of the third year after the year to which the relevant PSU was granted. Each vested PSU entitles the holder to receive a cash payment equal to the five-day volume weighted average trading price of the Shares preceding the date of redemption multiplied by a vesting factor. The vesting factor is based on performance conditions established by the Board of Directors prior to the date of grant of the PSU. The stock-based compensation expense of the PSUs is recorded as SG&A on a straight-line basis over the vesting period with a corresponding entry to either accrued liabilities or other liabilities. This estimated value is adjusted each period based on the period-end trading price of the Shares and an estimated vesting factor, with any changes in the fair value of the liability being recognized in earnings. Dividend equivalent grants, if any, are recorded as stock-based compensation expense in the period the dividend is paid.

p) Financial instruments Classification

Newalta's financial instruments are classified into one of four categories and are initially recognized at fair value and subsequently measured as noted in the table below.


----------------------------------------------------------------------------
Category                               Subsequent Measurement
----------------------------------------------------------------------------
Financial assets at fair value         Fair value and changes in fair value
through profit and loss ("FVTPL") and  are recognized in net earnings
held-for-trading investments ("HFT")
----------------------------------------------------------------------------
Loans and receivables                  Amortized cost, using the effective
                                       interest method
----------------------------------------------------------------------------
Available-for-sale financial assets    Fair value and changes in fair value
("AFS")                                are recorded in other comprehensive
                                       income until the instrument is
                                       derecognized or impaired
----------------------------------------------------------------------------
Financial liabilities                  Amortized cost, using the effective
                                       interest method
----------------------------------------------------------------------------

Cash and accounts and other receivables are classified as loans and receivables. Senior secured debt, senior unsecured debentures, bank indebtedness, accounts payable and accrued liabilities, dividends payable and other liabilities are classified as financial liabilities.

Newalta categorizes its financial instruments carried at fair value into one of three different levels, depending on the significance of inputs employed in their measurement.

Level 1 includes assets and liabilities measured at fair value based on unadjusted quoted prices for identical assets and liabilities in active markets that are accessible at the measurement date. An active market for an asset or liability is considered to be a market where transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Newalta's cash, "AFS" investments, and senior unsecured debentures are classified as level 1 financial instruments.

Level 2 includes valuations determined using directly or indirectly observable inputs other than quoted prices included within Level 1. Financial instruments in this category are valued using models or other industry standard valuation techniques derived from observable market data. Such valuation techniques include inputs such as quoted forward prices, time value, volatility factors and broker quotes that can be observed or corroborated in the market for the entire duration of the derivative instrument. Instruments valued using Level 2 inputs include the embedded derivative within the senior unsecured debentures, held-for-trading investments, and senior secured debt.

Level 3 includes valuations based on inputs which are less observable, unavailable or where the observable data does not support a significant portion of the instruments' fair value. Generally, Level 3 valuations are longer dated transactions, occur in less active markets, occur at locations where pricing information is not available or have no binding broker quote to support Level 2 classification. At December 31, 2013 and 2012, Newalta did not have any Level 3 assets or liabilities.

Embedded derivatives

The embedded derivatives are classified at fair value through profit and loss ("FVTPL"). They were valued using the option adjusted spread ("OAS") model, which requires management to make judgments, estimates and assumptions. They are valued at fair value upon initial recognition and at the end of each reporting period with gains and losses recognized through finance charges in the consolidated statement of operations.

Transaction costs

Transaction costs incurred with respect to the credit facility are deferred and amortized using the straight-line method over the term of the facility. The asset is recognized in prepaid expenses and other assets on the balance sheet while the amortization is included in financing charges within net income. Transaction costs associated with other financial liabilities are netted against the related liability.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment were affected.


----------------------------------------------------------------------------
Category             Impairment methodology    Indicators of Impairment
----------------------------------------------------------------------------
Available for sale   Cumulative gains or       Significant or prolonged
equity investments   losses previously         decline in the fair value of
                     recognized on other       the security below its cost
                     comprehensive income are
                     reclassified to profit or
                     loss in the period
----------------------------------------------------------------------------
Financial assets     Difference between the    The following indicators
carried at amortized asset's carrying amount   apply to the remaining two
cost                 and the present value of  categories:
                     estimated future cash
                     flows, discounted at the  - Significant financial
                     financial asset's         difficulty of the issuer or
                     original effective        counterparty
                     interest rate
                                               - Breach of contract, such as
                                               default or delinquency in
                                               interest of principal
                                               payments

                                               - It becomes probable that
                                               the borrower will enter
                                               bankruptcy or financial
                                               reorganization

                                               - Disappearance of an active
                                               market for that asset because
                                               of financial difficulties
-----------------------------------------------
Other financial      Carrying amount of the
assets               financial asset is
                     reduced by the impairment
                     loss directly for all
                     financial assets with the
                     exception of trade
                     receivables, where the
                     carrying amount is
                     reduced through the use
                     of an allowance account
----------------------------------------------------------------------------

q) Functional and presentation currency

Each of the Corporation's subsidiaries is measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The financial statements are presented in Canadian dollars, which is the Corporation's functional currency.

Upon consolidation, the financial statements of the subsidiary that have a functional currency different from that of the Corporation are translated into Canadian dollars whereby assets and liabilities are translated at the rate of exchange at the balance sheet date, revenues and expenses are translated at average monthly exchange rates (as this is considered a reasonable approximation of actual rates), and gains and losses in translation are recognized in the shareholders' equity section as accumulated other comprehensive income.

If the Corporation were to dispose of its entire interest in a foreign operation, or to lose control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation would be recognized in net earnings. If the Corporation were to dispose of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary would be reallocated between controlling and non-controlling interests.

r) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. A qualifying asset requires a period of six months or greater to be prepared for its intended use or sale.

s) Recent pronouncements issued

The following standards were adopted by Newalta for the first time in the financial year beginning January 1, 2013. There have been no material impacts upon adoption:


--  IFRS 10, "Consolidated Financial Statements"
--  IFRS 11, "Joint Arrangements"
--  IFRS 12, "Disclosure of Interests in Other Entities"
--  IFRS 13, "Fair Value Measurement"

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after January 1, 2014, and have not been applied in preparing these financial statements. None of these are expected to have a material impact on Newalta's financial statements.

NOTE 3. INVENTORIES

Inventories consist of the following:


----------------------------------------------------------------------------
                                       December 31, 2013   December 31, 2012
----------------------------------------------------------------------------
Lead                                              34,106              23,165
Recycled and processed products                    7,678               6,828
Recovered crude oil                                6,526               5,928
Parts and supplies                                 8,727               7,202
----------------------------------------------------------------------------
Total inventories                                 57,037              43,123
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The cost of inventories expensed in cost of sales for the three months and year ended December 31, 2013, was $23.1 million and $103.1 million respectively (for the three months and year ended December 31, 2012 - $32.5 million and $88.0 million respectively). Inventories are pledged as general security under the credit facility.

NOTE 4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:


----------------------------------------------------------------------------

                                          Plant and
                                    Land  equipment  Landfill(1)      Total
----------------------------------------------------------------------------
Cost
Balance, December 31, 2011        14,696  1,031,756      135,719  1,182,171
Additions during the year              -    167,548        8,349    175,897
Disposals during the year             (3)    (7,011)           -     (7,014)
Effect of change in
 decommissioning estimate              -     (2,366)           -     (2,366)
Effect of foreign currency
 exchange differences                  -     (1,339)           -     (1,339)
----------------------------------------------------------------------------
Balance, December 31, 2012        14,693  1,188,588      144,068  1,347,349
----------------------------------------------------------------------------
Additions during the year            218    167,143        3,779    171,140
Disposals during the year           (139)    (6,285)           -     (6,424)
Transfers to assets held for
 sale                               (915)    (1,355)           -     (2,270)
Effect of change in
 decommissioning estimate              -    (14,600)           -    (14,600)
Effect of foreign currency
 exchange differences                  -      5,619            -      5,619
----------------------------------------------------------------------------
Balance, December 31, 2013        13,857  1,339,110      147,847  1,500,814
----------------------------------------------------------------------------
Accumulated Amortization
Balance, December 31, 2011             -   (300,003)     (62,066)  (362,069)
Amortization for the year              -    (49,927)     (10,385)   (60,312)
Disposals during the year              -      4,414            -      4,414
Effect of foreign currency
 exchange differences                  -        198            -        198
----------------------------------------------------------------------------
Balance, December 31, 2012             -   (345,318)     (72,451)  (417,769)
----------------------------------------------------------------------------
Amortization for the year              -    (58,359)      (7,906)   (66,265)
Disposals during the year              -      3,277            -      3,277
Transfers to assets held for
 sale                                  -       (250)           -       (250)
Restructuring related
 impairment                         (481)    (6,868)           -     (7,349)
Effect of foreign currency
 exchange differences                  -       (537)           -       (537)
----------------------------------------------------------------------------
Balance, December 31, 2013          (481)  (408,055)     (80,357)  (488,893)
----------------------------------------------------------------------------
Carrying amounts
As at December 31, 2012           14,693    843,270       71,617    929,580
As at December 31, 2013           13,376    931,055       67,490  1,011,921
----------------------------------------------------------------------------

1.  Due to increased capacity and decreased future estimated costs realized
    in July 2013, the amortization rate per metric tonne (MT) for Stoney
    Creek landfill has decreased from approximately $13/MT to $6/MT.

a) Borrowing costs

For the three months and year ended December 31, 2013, Newalta capitalized $0.8 million and $2.8 million respectively, (for the three months and year ended December 31, 2012 - $1.6 million and $4.7 million respectively) of borrowing costs to qualifying assets using a capitalization rate of 5.86% and 5.96% respectively (December 31, 2012 - 6.25% and 6.3% respectively).

b) Assets held for sale

Assets held for sale of $2.5 million as at December 31, 2013 includes land and buildings of $0.9 million and equipment of $1.4 million relating to planned sales of facilities and assets in the Industrial division. It was determined at December 31, 2013 that the sale of these facilities assets and/or their operations was highly probable, therefore the carrying amount of the assets has been reclassified to current assets, within prepaid expenses and other assets on the balance sheet. The fair value measurement for the disposal group has been categorized as a Level 2 fair value based on market inputs that are observable for the assets.

c) Restructuring related impairment

In December 2013, Newalta announced their intention to streamline resources in the Industrial division through a rationalization of business lines and facilities in 2014. This initiative resulted in Newalta recording a non-cash impairment loss of $21.2 million. The recoverable amount of $10.3 million was based on fair value less costs to sell. The company used an expected future cash flow approach with a risk adjusted discount rate of 11.6% on a pre-tax basis. The fair value measurement for the asset impairment charge has been categorized as a Level 3 fair value.

The pre-tax asset impairment charge was allocated as follows:


----------------------------------------------------------------------------
                                                        December 31, 2013(1)
----------------------------------------------------------------------------
Property, plant and equipment                                          7,599
Intangible assets (Note 5)                                             5,849
Goodwill (Note 5)                                                      7,750
----------------------------------------------------------------------------
                                                                      21,198
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  The total asset impairment charge contains $5.5 million which relates to
    assets classified as held for sale at December 31, 2013.

NOTE 5. PERMITS, INTANGIBLE ASSETS AND GOODWILL


----------------------------------------------------------------------------
                                            Definite
                                                life
                                Indefinite  permits/        Total
                                   permits    rights  Intangibles  Goodwill
----------------------------------------------------------------------------
Cost
Balance, December 31, 2011          53,037    14,506       67,543   102,897
Change during the year                   -    (2,850)      (2,850)     (282)
----------------------------------------------------------------------------
Balance, December 31, 2012          53,037    11,656       64,693   102,615
----------------------------------------------------------------------------
Change during the year                 741      (514)         227     1,362
Transfers to assets held for
 sale                                 (120)        -         (120)      (60)
----------------------------------------------------------------------------
Balance, December 31, 2013          53,658    11,142       64,800   103,917
----------------------------------------------------------------------------
Accumulated Amortization (1)
Balance, December 31, 2011               -    (7,950)      (7,950)        -
Amortization for the year                -      (979)        (979)        -
Expired intangibles                      -     2,850        2,850         -
----------------------------------------------------------------------------
Balance, December 31, 2012               -    (6,079)      (6,079)        -
----------------------------------------------------------------------------
Amortization for the year                -      (732)        (732)        -
Amortization related to
 disposals                               -       455          455         -
Transfers to assets held for
 sale                                    -         -            -    (5,468)
Restructuring related
 impairment                         (5,849)        -       (5,849)   (2,282)
----------------------------------------------------------------------------
Balance, December 31, 2013          (5,849)   (6,356)     (12,205)   (7,750)
----------------------------------------------------------------------------
Carrying amounts
As at December 31, 2012             53,037     5,577       58,614   102,615
As at December 31, 2013             47,809     4,786       52,595    96,167
----------------------------------------------------------------------------


1.  Amortization is included in cost of sales and SG&A in the Consolidated
    Statements of Operations.

Intangibles have been allocated to the following CGUs:


----------------------------------------------------------------------------
                                                 December 31,   December 31,
                                                         2013        2012(1)
----------------------------------------------------------------------------
West Industrial                                           479            487
East Industrial                                        36,216         42,032
VSC                                                    15,900         15,900
Oilfield                                                    -            195
Heavy Oil                                                   -              -
U.S.                                                        -              -
----------------------------------------------------------------------------
                                                       52,595         58,614
----------------------------------------------------------------------------

1.  Prior year information has been restated to conform to current year
    presentation.

Goodwill has been allocated to the following CGUs:


----------------------------------------------------------------------------
                                                 December 31,   December 31,
                                                         2013        2012(1)
----------------------------------------------------------------------------
West Industrial                                         1,130          1,130
East Industrial                                        34,594         41,035
VSC                                                         -              -
Oilfield                                               57,624         57,631
Heavy Oil                                               2,819          2,819
U.S.                                                        -              -
----------------------------------------------------------------------------
                                                       96,167        102,615
----------------------------------------------------------------------------

1.  Prior year information has been restated to conform to current year
    presentation.

CGU impairment

In assessing goodwill and indefinite life intangible assets for impairment at December 31, 2013 and 2012, Newalta compared the aggregate recoverable amount of the assets included in the CGUs to their respective carrying amounts. The recoverable amount was determined based on the value in use of the CGUs, using growth rates reflective of previous years growth, excluding future growth capital spending and associated revenues. There was no impairment at the CGU level as at December 31, 2013 and 2012.

Key assumptions included the following:


----------------------------------------------------------------------------

Year ended December               West       East                Heavy
 31, 2013           Periods Industrial Industrial   VSC Oilfield   Oil  U.S.
----------------------------------------------------------------------------
                       2018
Weighted average        and
 growth rate         beyond       2.9%       2.6%  2.9%     3.6%  3.1%  3.6%
                       2014
Pre-tax discount        and
 rate                beyond      12.9%      11.6% 13.6%    14.9% 15.8% 12.9%
----------------------------------------------------------------------------

Year ended December               West       East                Heavy
 31, 2012(1)        Periods Industrial Industrial   VSC Oilfield   Oil  U.S.
----------------------------------------------------------------------------
                       2017
Weighted average        and
 growth rate         beyond       2.9%       2.9%  2.9%     3.6%  3.1%  3.6%
                       2013
Pre-tax discount        and
 rate                beyond      16.0%      12.7% 16.3%    17.8% 18.4% 16.1%
----------------------------------------------------------------------------

1.  Prior year information has been restated to conform to current year
    presentation.

In all CGUs, reasonably possible changes in key assumptions would not cause the recoverable amount of goodwill to fall below the carrying value.

NOTE 6. OTHER LONG-TERM ASSETS

a) Other long-term assets consist of the following:


----------------------------------------------------------------------------
                                                 December 31,   December 31,
                                                         2013           2012
----------------------------------------------------------------------------
Embedded derivative (Note 17)                          17,050         14,138
Deferred tax asset (Note 10)                                -          2,874
Investment in TerraAqua Resource Management
 LLC ("TARM")                                           6,123          6,043
Other                                                   1,459            547
----------------------------------------------------------------------------
                                                       24,632         23,602
----------------------------------------------------------------------------

TerraAqua Resource Management LLC

Newalta owns a 50% interest in TARM. This joint venture is included within other long-term assets. Newalta's interest in TARM is accounted for under the equity method and these financial statements include Newalta's share of net earnings from the date that joint control commenced, based on the present 50% ownership interest in TARM. Newalta's share of earnings for the year ended December 31, 2013, as well as the assets and liabilities as at December 31, 2013, are not significant.

NOTE 7. SENIOR SECURED DEBT


                                                 December 31,   December 31,
                                                         2013           2012
----------------------------------------------------------------------------
Senior secured debt                                   117,136         76,500
----------------------------------------------------------------------------

On June 17, 2013, Newalta entered into an amended and restated extendible revolving Credit Facility ("Credit Facility"). The maturity of this Credit Facility is July 12, 2016. The principal borrowing amount was increased from $225 million to $250 million. There were no other significant changes to the terms of the Credit Facility. Newalta may, at its option, request an extension of the credit facility on an annual basis. If no request to extend the Credit Facility is made by Newalta, the entire amount of the outstanding indebtedness would be due in full on July 12, 2016. The Credit Facility also requires Newalta to be in compliance with certain covenants. As at December 31, 2013 and 2012, Newalta was in compliance with all covenants (Note 13).

For the three months and year ended December 31, 2013, the weighted average interest rate on senior secured debt was 2.98% and 3.12%, respectively, (for the three months and year ended December 31, 2012 - 3.29% and 3.56% respectively).

NOTE 8. SENIOR UNSECURED DEBENTURES

The trust indenture under which the senior unsecured debentures were issued requires Newalta to be in compliance with certain covenants as at December 31 of each year. As at December 31, 2013 and 2012, Newalta was in compliance with all covenants (Note 15).


                                                  December 31, December 31,
                                                          2013         2012
----------------------------------------------------------------------------
Senior unsecured debentures series 1 (Note 17)         125,299      125,376
Senior unsecured debentures series 2 (Note 17)         125,275      125,322
Unamortized issue costs                                 (3,604)      (4,364)
----------------------------------------------------------------------------
Senior unsecured debentures                            246,970      246,334
----------------------------------------------------------------------------

Series 1

On November 23, 2010, Newalta issued $125.0 million of 7.625% series 1 senior unsecured debentures ("series 1"). The series 1 debentures mature on November 23, 2017. The series 1 debentures bear interest at 7.625% per annum and such interest is payable in equal instalments semi-annually in arrears on May 23 and November 23 in each year. The series 1 debentures are unsecured senior obligations and rank equally with all other existing and future unsecured senior debt and senior to any subordinated debt that may be issued by Newalta or any of its subsidiaries. The series 1 debentures are effectively subordinated to all secured debt to the extent of collateral on such debt.

As of November 23, 2013, the series 1 debentures are redeemable at the option of Newalta, in whole or in part, at redemption prices expressed as percentages of the principal amount, plus in each case accrued interest to the redemption date, if redeemed during the twelve month period beginning on November 23 of the years as follows: Year 2013 - 103.813%; Year 2014 - 102.542%; Year 2015 - 101.906%; Year 2016 and thereafter - 100%.

If a change of control occurs, Newalta will be required to offer to purchase all or a portion of each debenture holder's series 1 debentures, at a purchase price in cash equal to 101% of the principal amount of the series 1 debentures offered for repurchase plus accrued interest to the date of purchase.

Series 2

On November 14, 2011, Newalta issued $125.0 million of 7.75% series 2 senior unsecured debentures ("series 2"). The series 2 debentures mature on November 14, 2019. The series 2 debentures bear interest at 7.75% per annum and such interest is payable in equal instalments semi-annually in arrears on May 14 and November 14 in each year, commencing on May 14, 2012. The series 2 debentures are unsecured senior obligations and rank equally with all other existing and future unsecured senior debt and senior to any subordinated debt that may be issued by Newalta or any of its subsidiaries. The series 2 debentures are effectively subordinated to all secured debt to the extent of collateral on such debt.

Prior to November 14, 2015, Newalta may on one or more occasions:


--  Redeem up to 35% of the aggregate principal amount of the series 2
    debentures, with the net cash proceeds of one or more public equity
    offerings at a redemption price equal to 107.75% of the principal
    amount, plus accrued and unpaid interest to the date of redemption.

--  Redeem the series 2 debentures, in whole or in part, at a redemption
    price which is equal to the greater of (a) the Canada Yield Price (as
    defined in the trust indenture) and (b) 101% of the aggregate principal
    amount of series 2 debentures redeemed, plus, in each case, accrued and
    unpaid interest to the redemption date.

After November 14, 2015, the series 2 debentures are redeemable at the option of Newalta, in whole or in part, at redemption prices expressed as percentages of the principal amount, plus in each case accrued interest to the redemption date, if redeemed during the twelve month period beginning on November 14 of the years as follows: Year 2015 - 103.875%; Year 2016 - 101.938%; Year 2017 and thereafter - 100%.

If a change of control occurs, Newalta will be required to offer to purchase all or a portion of each debenture holder's series 2 debentures, at a purchase price in cash equal to 101% of the principal amount of the series 2 debentures offered for repurchase plus accrued interest to the date of purchase.

NOTE 9. INCENTIVE PLANS

a) Option Plans

For the year ended December 31, 2013, the weighted average price of our shares at the date of exercise of the options was $15.02 (for the year ended December 31, 2012 - $14.66).

A summary of the status of Newalta's option plans as of December 31, 2013 and December 31, 2012 and changes during the period are presented as follows:


----------------------------------------------------------------------------
                                                            Weighted average
                                            Option plan       exercise price
                                                 (000s)            ($/share)
----------------------------------------------------------------------------
At December 31, 2011                              3,359                 8.68
----------------------------------------------------------------------------
Granted                                             924                12.80
Exercised                                          (241)                7.34
Forfeited                                          (346)               18.76
----------------------------------------------------------------------------
At December 31, 2012                              3,696                11.30
----------------------------------------------------------------------------
Granted (1)                                         965                15.57
Exercised                                          (826)                6.95
Forfeited                                          (695)               16.62
----------------------------------------------------------------------------
At December 31, 2013 (2)                          3,140                12.58
----------------------------------------------------------------------------
Exercisable
At December 31, 2012                              1,757                11.50
At December 31, 2013                              1,351                10.46
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Each tranche of the options vest over a three year period (with a five
    year life).
2.  The fair value was calculated using the Black-Scholes method of
    valuation, assuming 25.50% volatility (December 31, 2012 - 26.30%), a
    weighted average expected annual dividend yield of 2.95% (December 31,
    2012 - 2.86%), a risk free rate of 1.10% (December 31, 2012 - 1.14%) and
    a 3% forfeiture rate (December 31, 2012 - 3%) by period.

----------------------------------------------------------------------------
Range of             Options   Weighted     Weighted      Options   Weighted
 exercise        outstanding    average      average  exercisable    average
 prices         December 31,  remaining     exercise December 31,   exercise
 ($/share)              2013       life        price         2013      price
----------------------------------------------------------------------------
3.81 - 5.40               25        0.4         4.61           25       4.61
7.65 - 8.07              539        1.0         8.07          539       8.07
11.93 - 14.00          1,558        2.5        12.32          765      12.21
14.01 - 19.46          1,018        4.0        15.56           22      15.13
----------------------------------------------------------------------------
                       3,140        2.7        12.58        1,351      10.46
----------------------------------------------------------------------------
----------------------------------------------------------------------------

b) Share Appreciation Rights ("SARs")

For the year ended December 31, 2013, the weighted average price of our shares at the date of exercise of the SARs was $15.50 (for the year ended December 31, 2012 - $14.17).

Changes in the number of outstanding SARs were as follows:


----------------------------------------------------------------------------
                                                            Weighted average
                                                   SARs       exercise price
                                                 (000s)            ($/right)
----------------------------------------------------------------------------
At December 31, 2011                              2,141                 9.69
----------------------------------------------------------------------------
Granted                                             812                12.70
Exercised                                          (426)                7.23
Forfeited                                          (179)               11.37
----------------------------------------------------------------------------
At December 31, 2012                              2,348                11.04
----------------------------------------------------------------------------
Granted (1)                                       1,018                15.59
Exercised                                          (697)                8.41
Forfeited                                          (365)               14.76
----------------------------------------------------------------------------
At December 31, 2013 (2)                          2,304                13.26
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable
At December 31, 2012                                733                10.34
At December 31, 2013                                722                10.95
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Each tranche of the SARs vest over a three year period (with a five year
    life).
2.  The fair value was calculated using the Black-Scholes method of
    valuation, assuming 25.50% volatility (December 31, 2012 - 26.30%), a
    weighted average expected annual dividend yield of 2.95% (December 31,
    2012 - 2.86%), a risk free rate of 1.10% (December 31, 2012 - 1.14%) and
    a 12% forfeiture rate (December 31, 2012 - 8%) by period.

----------------------------------------------------------------------------
Range of              SARs    Weighted     Weighted         SARs    Weighted
 exercise      outstanding     average      average  exercisable     average
 prices       December 31,   remaining     exercise December 31,    exercise
 ($/share)            2013        life        price         2013       price
----------------------------------------------------------------------------
5.31 - 8.76            210         0.8         7.42          210        7.42
11.93 - 16.65        2,094         3.7        13.84          512       12.39
----------------------------------------------------------------------------
                     2,304         3.4        13.26          722       10.95
----------------------------------------------------------------------------
----------------------------------------------------------------------------

c) Share Unit Plans

Changes in the number of outstanding share units under our Deferred Share Unit and Performance Share Unit plans were as follows:


----------------------------------------------------------------------------
                                                                      Units
                                                                     (000s)
----------------------------------------------------------------------------
At December 31, 2011                                                    145
Granted                                                                 112
Exercised                                                               (25)
----------------------------------------------------------------------------
At December 31, 2012                                                    232
Granted                                                                  65
Exercised                                                              (111)
----------------------------------------------------------------------------
At December 31, 2013                                                    186
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable
At December 31, 2012                                                      -
At December 31, 2013                                                      -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

d) Stock-based Compensation Expense

The following table summarizes the stock-based compensation expense recorded for all plans within SG&A on the Consolidated Statements of Operations:


                                           For the three
                                            months ended  For the year ended
                                            December 31,        December 31,
                                           2013     2012     2013       2012
----------------------------------------------------------------------------
Stock option plans - non-cash expense     1,614    3,141    3,975      6,250
----------------------------------------------------------------------------
SARs and share unit plans - cash
 expense                                  2,030      970    6,345      3,303
SARs and share unit plans - non-cash
 expense                                    418    1,314     (826)     2,705
----------------------------------------------------------------------------
Total expense - SARs and share unit
 plans                                    2,448    2,284    5,519      6,008
----------------------------------------------------------------------------
Total stock-based compensation expense    4,062    5,425    9,494     12,258
----------------------------------------------------------------------------
----------------------------------------------------------------------------

e) Incentive Plan Liabilities

As at December 31, 2013, the total liability related to the Corporation's incentive plans was $10.4 million, with $7.9 million classified as current and $2.5 million classified as non-current (December 31, 2012 total incentive plan liabilities of $27.0 million, with $22.8 million classified as current and $4.2 million classified as non-current). The current liability associated with the Corporation's incentive plans is included in Accounts payable and accrued liabilities on the balance sheet. Non-current liability is recorded in Other liabilities on the balance sheet.

In December 2013, the Board of Directors modified the Option Plan to eliminate the ability for option holders to settle options for cash. As a result of this change, the stock based compensation liability of $12.6 million relating to stock options was reclassified to contributed surplus.

NOTE 10. INCOME TAX

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of Newalta's deferred income tax assets and liabilities are as follows:


                                               December 31,    December 31,
                                                       2013            2012
----------------------------------------------------------------------------
Deferred income tax liabilities:
  Property, plant and equipment                    (130,955)       (121,658)
  Goodwill and intangible assets                    (16,966)        (18,652)
----------------------------------------------------------------------------
                                                   (147,921)       (140,310)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deferred income tax assets:
  Non-capital loss carry forwards and other
   credits                                           41,714          37,101
  Decommissioning liabilities                        15,835          20,303
  Deferred revenue                                    3,473           1,670
  Deferred expense                                    4,545           4,857
  Other comprehensive income                            266             223
  Other                                               1,442           1,511
----------------------------------------------------------------------------
                                                     67,275          65,665
----------------------------------------------------------------------------
Net deferred income tax liability                   (80,646)        (74,645)
----------------------------------------------------------------------------
Comprised of:
  Deferred income tax assets                              -           2,874
  Deferred income tax liabilities                   (80,646)        (77,519)
----------------------------------------------------------------------------
                                                    (80,646)        (74,645)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Non-capital loss carry forwards of $98.2 million relate to Canadian operations and $46.5 million relate to our U.S. operations. The losses relating to Canadian operations begin to expire in 2026 and losses relating to U.S. operations begin to expire in 2029.

The income tax expense differs from the amount computed by applying Canadian statutory rates to operating income for the following reasons:


                                                         For the year ended
                                                               December 31,
                                                             2013      2012
----------------------------------------------------------------------------
Consolidated earnings of Newalta Corporation before
 taxes and distributions to shareholders                   27,894    54,012
Current statutory income tax rate                           25.75%    25.72%
----------------------------------------------------------------------------
Computed tax expense at statutory rate                      7,183    13,892
Increase (decrease) in taxes resulting from:
  Unrealized gain on embedded derivatives                    (782)   (3,457)
  Stock-based compensation expense and non-deductible
   costs                                                      769       893
  Tax impact of changes in estimate for prior year tax
   pools                                                   (1,460)        -
  Other                                                       244      (120)
----------------------------------------------------------------------------
Reported income tax expense                                 5,954    11,208
----------------------------------------------------------------------------

NOTE 11. RECONCILIATION OF DECOMMISSIONING LIABILITY

The future decommissioning liability was estimated by management based on the anticipated costs to abandon and reclaim facilities and wells, and the projected timing of these expenditures. The net present value of this amount, $61.1 million (December 31, 2012 - $78.9 million) was accrued and recorded in decommissioning liability on the balance sheet at December 31, 2013. The estimated future cost for decommissioning liability at December 31, 2013, was $327.0 million over an expected range up to 200 years. Effective July 1, 2013, a permit amendment decreased the future obligation at Stoney Creek landfill. Newalta used the Bank of Canada's long term bond rate of 3.20% as at December 31, 2013 (December 31, 2012 - 2.37%) and an inflation rate of 2% (December 31, 2012 - 2%) to calculate the present value of the decommissioning liability with the exception of Stoney Creek landfill for which we used a discount rate of 6% (December 31, 2012 - 6%). The reconciliation of estimated and actual expenditures for the period is provided below:


----------------------------------------------------------------------------
Decommissioning liability as at January 1, 2012                      77,756
Actual expenditures incurred to fulfill obligations                  (3,554)
Unwinding of discount                                                 2,482
Change in estimate(1)                                                 2,257
----------------------------------------------------------------------------
Decommissioning liability as at December 31, 2012                    78,941
Actual expenditures incurred to fulfill obligations                  (5,287)
Unwinding of discount                                                 2,599
Change in estimate(1)                                               (15,154)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liability as at December 31, 2013                    61,099
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Changes in the discount rates and in the estimated costs of abandonment
    and reclamation are factors resulting in a change in estimate.

NOTE 12. SHAREHOLDERS' CAPITAL

Authorized capital of the Corporation consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series. The following table is a summary of the changes in shareholders' capital during the periods:


Common Shares                                       Shares (#)   Amount ($)
----------------------------------------------------------------------------
Shares outstanding as at January 1, 2012                48,607      317,386
Shares issued on equity offering(1)                      5,500       74,400
Shares issued on exercise of options                       168        2,443
Cancellation of shares                                     (12)        (181)
----------------------------------------------------------------------------
Shares outstanding as at December 31, 2012              54,263      394,048
----------------------------------------------------------------------------
Shares issued on exercise of options                       704       10,634
Shares issued under dividend reinvestment plan             369        5,212
----------------------------------------------------------------------------
Shares outstanding as at December 31, 2013              55,336      409,894
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Issue costs are $2.8 million, net of tax of $0.7 million for 2012

Newalta's dividend reinvestment plan ("DRIP") allows eligible shareholders to elect to reinvest their cash dividends in additional common shares at a 5% discount to average market price.

NOTE 13. CAPITAL DISCLOSURES

Newalta's capital structure consists of:


----------------------------------------------------------------------------
                                                 December 31,   December 31,
                                                         2013           2012
----------------------------------------------------------------------------
Senior secured debt                                   117,136         76,500
Letters of credit issued as financial security
 to third parties (Note 16)                            16,230         16,046
Senior unsecured debentures(1)                        250,574        250,698
Shareholders' equity                                  675,162        641,440
----------------------------------------------------------------------------
                                                    1,059,102        984,684
----------------------------------------------------------------------------

1.  Excludes issue costs

The objectives in managing the capital structure are to:


--  Align our debt structure with our asset structure;
--  Utilize an appropriate amount of leverage to maximize return on
    Shareholders' equity; and
--  Provide for borrowing capacity and financial flexibility to support
    Newalta's operations.

Management and the Board of Directors review and assess Newalta's capital structure and dividend policy at least at each regularly scheduled board meeting which are held at a minimum four times annually. The financial strategy may be adjusted based on the current outlook of the underlying business, the capital requirements to fund growth initiatives and the state of the debt and equity capital markets. In order to maintain or adjust the capital structure, Newalta may:


--  Issue shares from treasury;
--  Issue new debt securities;
--  Cause the return of letters of credit with no additional financial
    security requirements;
--  Replace outstanding letters of credit with bonds or other types of
    financial security;
--  Amend, revise, renew or extend the terms of its then existing long-term
    debt facilities;
--  Draw on existing credit facility and/or enter into new agreements
    establishing new credit facilities;
--  Adjust the amount of dividends paid to shareholders; and/or
--  Sell idle, redundant or non-core assets.

Management monitors the capital structure based on covenants required pursuant to the Credit Facility.

Covenants under our Credit Facility(1) include:


----------------------------------------------------------------------------
                               December 31,   December 31,
Ratio                                  2013           2012         Threshold
----------------------------------------------------------------------------
Senior secured debt(2) to
 EBITDA(3)                           0.88:1         0.66:1    2.75:1 maximum
Total debt(4) to EBITDA(3)           2.54:1         2.46:1    4.00:1 maximum
Interest coverage                    5.44:1         5.09:1    2.25:1 minimum
----------------------------------------------------------------------------

1.  We are restricted from declaring dividends if we are in breach of any
    covenants under our credit facility.
2.  Senior secured debt means the total debt less the senior unsecured
    debentures.
3.  EBITDA is a non-IFRS measure, the closest measure of which is net
    earnings. For the purpose of calculating the covenant, EBITDA is defined
    as the trailing twelve months consolidated net income for Newalta before
    the deduction of interest, taxes, depreciation and amortization, and
    non-cash items (such as non-cash stock-based compensation and gains or
    losses on asset dispositions). Additionally, EBITDA is normalized for
    extraordinary and non-recurring items, and for any acquisitions or
    dispositions as if they had occurred at the beginning of the period.
4.  Total debt comprises outstanding indebtedness under the credit facility,
    including our bank surplus or overdraft balance and the senior unsecured
    debentures.

The trust indenture under which the senior unsecured debentures were issued also contains certain annual restrictions and covenants that, subject to certain exceptions, limit our ability to incur additional indebtedness, pay dividends, make certain loans or investments and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations.

Covenants under the trust indenture include:


----------------------------------------------------------------------------
                    December 31, December 31,
Ratio                       2013         2012                      Threshold
----------------------------------------------------------------------------
Senior Secured Debt
 including Letters                                  $25,000 + the greater of
 of Credit               133,366       92,546      $220,000 and 1.75x EBITDA
Cumulative Finance
 Lease Obligations           nil          nil                $25,000 maximum
Consolidated Fixed
 Charge Coverage          5.20:1       5.09:1                 2.00:1 minimum
Period End Surplus
 for Restricted                                   Restricted payments cannot
 Payments(1)             121,385      110,739                 exceed surplus
----------------------------------------------------------------------------

1.  We are restricted from declaring dividends, purchasing and redeeming
    shares or making certain investments if the total of such amounts
    exceeds the period end surplus for such restricted payments.

NOTE 14. EARNINGS PER SHARE

Basic earnings per share calculations for the year ended December 31, 2013 and 2012 were based on the weighted average number of shares outstanding for the respective years. Diluted earnings per share include the potential dilution of outstanding options under incentive plans to acquire shares.

The calculation of diluted earnings per share does not include anti-dilutive options. These options would not be exercised during the period because their exercise price is higher than the average market price for the period. The inclusion of these options would cause the diluted earnings per share to be overstated. The number of excluded options for the year ended December 31, 2013 was 952,500 (680,000 for the year ended December 31, 2012).


                                    For the three months  For the year ended
                                      ended December 31,        December 31,
----------------------------------------------------------------------------
                                          2013      2012      2013      2012
----------------------------------------------------------------------------
Weighted average number of shares       55,205    52,741    54,938    49,690
Net additional shares if options
 exercised                                 551       732       577       833
----------------------------------------------------------------------------
Diluted weighted average number of
 shares                                 55,756    53,473    55,515    50,523
----------------------------------------------------------------------------

NOTE 15. DIVIDENDS DECLARED


                                For the three months      For the year ended
                                  ended December 31,            December 31,
----------------------------------------------------------------------------
                                    2013        2012        2013        2012
----------------------------------------------------------------------------
Total dividends declared per
 share                              0.11        0.10        0.43        0.38
----------------------------------------------------------------------------

On December 16, 2013 Newalta declared a dividend of $0.11 per share to holders of shares on record on December 31, 2013. This dividend was paid on January 15, 2014.

NOTE 16. COMMITMENTS

a) Debt and Lease Commitments

Newalta has annual commitments for senior long-term debt, debentures, and leased property and equipment as follows:


----------------------------------------------------------------------------
                       2014   2015    2016    2017   2018 Thereafter   Total
----------------------------------------------------------------------------
Amount drawn on
 credit facility(1)
 (Note 7)                 -      - 117,136       -      -          - 117,136
Senior unsecured
 debentures          19,219 19,219  19,219 143,226  9,688    133,440 344,011
----------------------------------------------------------------------------
Total debt
 commitments         19,219 19,219 136,355 143,226  9,688    133,440 461,147
----------------------------------------------------------------------------
Office leases        10,224 10,684  10,583  10,014  9,296     17,842  68,643
Operating leases      5,811  3,289   1,735     584    151          -  11,570
Surface leases          447    447     447     447    447        150   2,385
----------------------------------------------------------------------------
Total debt and other
 commitments         35,701 33,639 149,120 154,271 19,582    151,432 543,745
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Gross of transaction costs. Interest payments are not reflected.

b) Enertech Partnership Agreement

In 2013, Newalta contributed $1.2 million to the Enertech Partnership Agreement. Newalta is contingently committed to capital contributions up to a maximum of $7.0 million over the 10 year investment period. The investment is classified as held-for-trading and is recorded in other long-term assets.

c) Letters of Credit and Surety Bonds

As at December 31, 2013, Newalta had issued letters of credit and surety bonds in respect of compliance with environmental licenses in the amount of $16.2 million and $40.5 million, respectively ($16.0 million and $43.8 million as at December 31, 2012).

NOTE 17. FINANCIAL INSTRUMENTS

Fair Value of Financial Assets and Liabilities

Newalta's financial instruments include cash, bank indebtedness, accounts and other receivables, other assets, accounts payable and accrued liabilities, dividends payable, senior secured debt and senior unsecured debentures. The fair values of Newalta's financial instruments that are included in the consolidated balance sheets, with the exception of the debentures, approximate their recorded amount due to the short-term nature of those instruments for cash, bank indebtedness, accounts and other receivable, accounts payable and accrued liabilities, dividends payable, senior secured debt and the note receivable, due to the floating nature of the interest rate applicable to these instruments. The fair values incorporate an assessment of credit risk. The carrying value of Newalta's financial instruments at December 31, 2013 are as follows:


----------------------------------------------------------------------------
                                                                       Total
                                      Loans and             Other   carrying
                              FVTPL receivables  AFS  liabilities      value
----------------------------------------------------------------------------
Accounts and other
 receivables                      -     148,998    -            -    148,998
Embedded Derivatives(2)      17,050           -    -            -     17,050
Held-for-trading
 investment(2)                1,240           -    -            -      1,240
Available for sale
 investment(1)                    -           -  219            -        219
Accounts payable and
 accrued liabilities              -           -    -      217,283    217,283
Dividends payable                 -           -    -        6,087      6,087
Senior secured debt(2)            -           -    -      117,136    117,136
----------------------------------------------------------------------------
----------------------------------------------------------------------------

1.  Assessed as Level 1.
2.  Assessed as Level 2.

All carrying values in the above table are equal to fair value, with the exception of embedded derivatives as noted below.

The fair value of the unsecured senior debentures is based on open market quotation as follows:


----------------------------------------------------------------------------
                                                                 Quoted fair
As at December 31, 2013                        Carrying value          value
----------------------------------------------------------------------------
7.625% series 1 senior unsecured debentures
 due November 23, 2017                                125,299        130,150
----------------------------------------------------------------------------
7.75% series 2 senior unsecured debentures due
 November 14, 2019                                    125,275        134,063
----------------------------------------------------------------------------

Embedded derivatives

The senior unsecured debentures have early redemption features at values based on percentages of the principal amount plus accrued and unpaid interest. Due to the redemption rates being fixed, an embedded derivative exists when compared to current market rates. Newalta estimates the fair value of the embedded derivatives using a valuation model that considers the current bond prices and spreads associated with the senior unsecured debentures. Newalta has recognized gains of $3.4 million and $3.0 million for the three months and year ended December 31, 2013, respectively (for the three months and year ended December 31, 2012 - $1.3 million and $13.4 million) and has determined the fair value of the embedded derivative for the senior unsecured debentures to be $17.1 million as at December 31, 2013. A corresponding embedded derivative asset was included within other long-term assets on the balance sheet. Subsequent changes in fair value will be included in finance charges on the consolidated statements of operations.

Offsetting financial instruments

Certain waste processing revenue sources entitle customers to credits on the sale of recovered products. The following table presents the recognized financial instruments that are offset as at December 31, 2013 and 2012:


----------------------------------------------------------------------------
                                               December 31,    December 31,
                                                       2013            2012
----------------------------------------------------------------------------
Gross trade receivables                             139,088         120,832
Gross liabilities offset                            (18,538)        (14,006)
----------------------------------------------------------------------------
Net trade receivables                               120,550         106,826
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Credit risk and economic dependence

Newalta is subject to credit risk on its trade accounts receivable balances. No single customer exceeded 10% of total accounts receivable at December 31, 2013, (one customer balance represented 10% as at December 31, 2012). Newalta views the credit risks on these amounts as normal for the industry. Credit risk is minimized by Newalta's broad customer base and diverse product lines, and is mitigated by the ongoing assessment of the credit worthiness of its customers as well as monitoring the amount and age of balances outstanding. Newalta's assessment of credit risk has remained unchanged from the prior year.

Revenue from Newalta's largest customer represented 11% of revenue for the year ended December 31, 2013 (10% for the year ended December 31, 2012). This revenue is recognized within the Industrial division. No other customer's revenue exceeded 10% for the period presented.

Based on the nature of operations, established collection history and industry norms, receivables are not considered past due until 90 days after invoice date, although standard payment terms require payment within 30 to 90 days. Depending on the nature of the service and/or product, customers may be provided with extended payment terms while Newalta gathers certain processing or disposal data. Included in the Corporation's trade receivable balance, are receivables totaling $5.7 million (December 31, 2012 - $5.0 million), which are considered to be outstanding beyond normal repayment terms at December 31, 2013. A provision of $1.1 million (December 31, 2012 - $0.5 million) has been established as an allowance for doubtful accounts. No additional provision has been made as there has not been a significant change in credit quality and the amounts are still considered collectible. Newalta does not hold any collateral over these balances but may hold credit insurance for specific non-domestic customer accounts. Total accounts receivable of $149.0 million is comprised of $120.6 million of trade receivables, accrued receivables of $20.2 million and other receivables of $8.2 million.


----------------------------------------------------------------------------
                  Trade receivables        Allowance for
Aging           aged by invoice date   doubtful accounts     Net receivables
----------------------------------------------------------------------------
                   Dec 31,   Dec 31,   Dec 31,   Dec 31,   Dec 31,   Dec 31,
                      2013      2012      2013      2012      2013      2012
----------------------------------------------------------------------------
Current             88,008    69,640         5        12    88,003    69,628
31-60 days          21,301    27,740         2         7    21,299    27,733
61-90 days           5,565     4,481        54        58     5,511     4,423
91 days +            5,676     4,965     1,035       403     4,641     4,562
----------------------------------------------------------------------------
Total              120,550   106,826     1,096       480   119,454   106,346
----------------------------------------------------------------------------
----------------------------------------------------------------------------

To determine the recoverability of a trade receivable, management analyzes accounts receivable, first identifying customer groups that represent minimal risk (large oil and gas and other low risk large companies, governments and municipalities). Impairment of the remaining accounts is determined by identifying specific accounts that are at risk, and then by applying a formula based on aging to the remaining amounts receivable. All amounts identified as at risk are provided for in an allowance for doubtful accounts. The changes in this account for the years ended December 31, 2013 and 2012 are as follows:


                                                December 31,    December 31,
Allowance for doubtful accounts                         2013            2012
----------------------------------------------------------------------------
Balance, beginning of year                               480             285
Net increase in provision                                784             154
Net amounts recovered (written off as
 uncollectible)                                         (168)             41
----------------------------------------------------------------------------
Balance, end of year                                   1,096             480
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors of Newalta, which has built an appropriate liquidity risk management framework for the management of the Corporation's short, medium and long-term funding and liquidity management requirements. Management mitigates liquidity risk by maintaining adequate reserves, banking facilities and other borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Newalta's assessment of liquidity risk has remained unchanged from the prior year.

Interest rate risk

Newalta is exposed to interest rate risk to the extent that its credit facility has a variable interest rate. Management does not enter into any derivative contracts to manage the exposure to variable interest rates. The senior unsecured debentures have fixed interest rates until their maturity dates, at which point, any remaining amounts owing under these debentures will need to be repaid or refinanced. Newalta's assessment of interest rate risk has remained unchanged from the prior year. The table below provides an interest rate sensitivity analysis to net earnings as at period end:


----------------------------------------------------------------------------
                                 For the three months   For the year ended
                                   ended December 31,          December 31,
----------------------------------------------------------------------------
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
If interest rates increased by
 1% with all other values held
 constant                             (280)      (193)    (1,081)      (854)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Market risk

Market risk is the risk that the fair value or future cash flows of Newalta's financial instruments will fluctuate because of changes in market prices. Newalta is exposed to foreign exchange market risk. Foreign exchange risk refers to the risk that the value of a financial commitment, recognized asset or liability will fluctuate due to changes in foreign currency exchange rates. The risk arises primarily from U.S. dollar denominated long-term debt and working capital. As at December 31, 2013, Newalta had $13.6 million in net working capital and $10 million in long-term debt both denominated in U.S. dollars. Management has not entered into any financial derivatives to manage the risk for the foreign currency exposure as at December 31, 2013. Newalta's assessment of market risk has remained unchanged from the prior year.

The table below provides a foreign currency sensitivity analysis to net earnings on long-term debt and working capital outstanding as at period end:


----------------------------------------------------------------------------
                                                 December 31,   December 31,
                                                         2013           2012
----------------------------------------------------------------------------
If the value of the U.S. dollar in relation to
 the CDN dollar increased by $0.01 with all
 other variables held constant                              5             67
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 18. FINANCE CHARGES


----------------------------------------------------------------------------
                                For the three months          For the year
                                   ended December 31,    ended December 31,
----------------------------------------------------------------------------
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Interest:
  Senior secured debt                1,356      1,260      5,359      5,322
  Senior unsecured debentures        4,805      4,805     19,219     19,219
  Other                                598        349      1,762      1,235
Amortization of issue costs            359        330      1,376      1,502
Unwinding of discount                  671        617      2,599      2,482
Capitalized borrowing costs           (520)    (1,595)    (2,798)    (4,664)
Revaluation and transfer of AFS
 financial assets                        -         74          -      1,700
----------------------------------------------------------------------------
Finance charges                      7,269      5,840     27,517     26,796
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 19. RELATED PARTIES

Significant subsidiaries

The financial statements include the financial statements of Newalta and our subsidiaries as at December 31, 2013 and 2012. Transactions between each subsidiary and the subsidiaries and parent are eliminated on consolidation. Newalta did not have any material related party transactions with entities outside the consolidated group in the years ended December 31, 2013 and 2012. The following is a list of the major subsidiary and related party of our operations:


                                                          Ownership interest
                                Country of Incorporation      2013      2012
----------------------------------------------------------------------------
Newalta
 Environmental
 Services Inc.       Subsidiary            United States      100%      100%
----------------------------------------------------------------------------
TerraAqua Resource
 Management LLC   Joint venture            United States       50%       50%
----------------------------------------------------------------------------

Key Management Personnel

Key management personnel are comprised of Newalta's Board of Directors and Executive Committee. The remuneration of key management personnel during the year was as follows:


----------------------------------------------------------------------------
                                                     Year ended December 31,
----------------------------------------------------------------------------
                                                         2013           2012
----------------------------------------------------------------------------
Short term benefits                                     4,359          4,276
Stock-based payments                                    7,613          4,424
Termination benefits                                      997              -
----------------------------------------------------------------------------
Total remuneration                                     12,969          8,700
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 20. INCOME STATEMENT SUPPLEMENTAL INFORMATION

Cost of sales includes $2.0 million, and SG&A includes $2.2 million from a legal settlement related to the misclassification of certain operating employees under the Fair Labour Standards Act (United States).

NOTE 21. CASH FLOW STATEMENT SUPPLEMENTAL INFORMATION

The following tables provide supplemental information:


----------------------------------------------------------------------------
                                 For the three months    For the year ended
                                   ended December 31,          December 31,
----------------------------------------------------------------------------
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Decrease (increase) in accounts
 and other receivables              15,224     10,514      1,525    (16,059)
Increase in inventories             (5,622)    (4,121)   (13,914)   (12,170)
Decrease (increase) in prepaid
 expenses and other assets           2,369      2,120     (3,901)    (4,293)
Increase in accounts payable and
 accrued liabilities                48,505     26,493     43,136     31,414
Decrease in accounts payable and
 accrued liabilities related to
 purchases of property, plant
 and equipment                     (33,398)    (8,164)   (18,513)   (14,511)
----------------------------------------------------------------------------
Total decrease (increase) in
 non-cash working capital           27,078     26,842      8,333    (15,619)
----------------------------------------------------------------------------


                                 For the three months    For the year ended
                                   ended December 31,          December 31,
----------------------------------------------------------------------------
                                      2013       2012       2013       2012
----------------------------------------------------------------------------
Additions to property, plant and
 equipment during the year         (71,589)   (56,780)  (170,373)  (172,180)
Increase in accounts payable and
 accrued liabilities related to
 purchases of property, plant
 and equipment                      33,398      8,164     18,513     14,511
----------------------------------------------------------------------------
Total cash additions to
 property, plant and equipment     (38,191)   (48,616)  (151,860)  (157,669)
----------------------------------------------------------------------------

NOTE 22. SEGMENTED INFORMATION

On January 1, 2013, Newalta reorganized the reporting structure into three divisions - New Markets, Oilfield and Industrial. These divisions constitute Newalta's reportable segments. The reportable segments were reorganized to improve alignment of operations for customers, to create an optimum management structure for expected growth and to provide improved disclosure to investors. The reportable segments are distinct strategic business units whose operating results are regularly reviewed by the Corporation's executive officers in order to assess financial performance and make resource allocation decisions. The reportable segments have separate operating management and operate in distinct competitive and regulatory environments.


--  The New Markets segment includes mobilization of equipment and staff to
    process waste at our customer sites, the processing of oilfield-
    generated wastes including treatment, water disposal, landfilling, and
    the sale of recovered crude oil; site remediation, centrifugation,
    dredging and dewatering, and the supply and operation of drill site
    processing equipment, including solids control and drill cuttings
    management.

--  The Oilfield segment includes the processing of oilfield-generated
    wastes including treatment and disposal, water disposal, clean oil
    terminalling, custom treating, the sale of recovered crude oil and the
    supply and operation of drill site processing equipment, including
    solids control and drill cuttings management.

--  The Industrial segment includes oil recycling services, lead battery
    recycling, landfilling of non-hazardous solid waste and the processing
    of industrial wastes including collection, treatment and disposal.


----------------------------------------------------------------------------
                     As at and for the three months ended December 31, 2013
                         New                        Corporate
                     Markets  Oilfield  Industrial  and Other  Consolidated
----------------------------------------------------------------------------
Revenue               62,531    47,480      93,788          -       203,799
Cost of sales (1)     44,839    30,625      82,240          -       157,704
----------------------------------------------------------------------------
Gross profit          17,692    16,855      11,548          -        46,095
Selling, general
 and
 administrative(2)         -         -           -     34,046        34,046
Restructuring
 related
 impairment                -         -      21,198          -        21,198
Net financing
 charges                   -         -           -      3,863         3,863
----------------------------------------------------------------------------
Earnings (loss)
 before taxes         17,692    16,855      (9,650)   (37,909)      (13,012)
----------------------------------------------------------------------------
Property, plant
 and equipment
 expenditures(3)      36,908    21,692       7,278      6,340        72,218
----------------------------------------------------------------------------
Goodwill               2,819    57,624      35,724          -        96,167
----------------------------------------------------------------------------
Total assets         348,817   417,250     551,517     90,657     1,408,241
----------------------------------------------------------------------------
Total liabilities    123,924    84,030     196,768    328,357       733,079
----------------------------------------------------------------------------



                   As at and for the three months ended December 31, 2012(4)
                         New                        Corporate
                     Markets  Oilfield  Industrial  and Other  Consolidated
----------------------------------------------------------------------------
Revenue               52,520    44,486     101,439          -       198,445
Cost of sales (1)     35,452    29,665      94,291          -       159,408
----------------------------------------------------------------------------
Gross profit          17,068    14,821       7,148          -        39,037
Selling, general
 and
 administrative(2)         -         -           -     28,969        28,969
Net financing
 charges                   -         -           -      5,238         5,238
----------------------------------------------------------------------------
Earnings before
 taxes                17,068    14,821       7,148    (34,207)        4,830
----------------------------------------------------------------------------
Property, plant
 and equipment
 expenditures         17,483    14,165      13,293     12,459        57,400
----------------------------------------------------------------------------
Goodwill               2,819    57,631      42,165          -       102,615
----------------------------------------------------------------------------
Total assets         279,296   382,612     554,193    102,657     1,318,758
----------------------------------------------------------------------------
Total liabilities     73,938    56,958     164,962    381,460       677,318
----------------------------------------------------------------------------

1.  Cost of sales includes amortization of $12,711 for 2013 (New Markets
    $5,629, Oilfield $3,344 and Industrial $3,738) and $14,271 for 2012 (New
    Markets $4,393, Oilfield $3,086 and Industrial $6,792).
2.  Selling, general and administrative includes amortization of $3,973 for
    2013 and $3,526 for 2012.
3.  Includes property, plant and equipment expenditures gross of disposals,
    decommissioning discount rate changes and foreign currency exchange
    differences.
4.  Prior year information has been restated to conform to current year
    presentation.

----------------------------------------------------------------------------
                              As at and for the year ended December 31, 2013
                            New                      Corporate
                        Markets Oilfield  Industrial and Other  Consolidated
----------------------------------------------------------------------------
Revenue                 227,572  184,607     371,217         -       783,396
Cost of sales (1)       152,406  114,894     327,558         -       594,858
----------------------------------------------------------------------------
Gross profit             75,166   69,713      43,659         -       188,538
Selling, general and
 administrative(2)            -        -           -   114,965       114,965
Restructuring related
 impairment                   -        -      21,198         -        21,198
Net financing charges         -        -           -    24,481        24,481
----------------------------------------------------------------------------
Earnings before taxes    75,166   69,713      22,461  (139,446)       27,894
----------------------------------------------------------------------------
Property, plant and
 equipment
 expenditures(3)         78,702   46,552      23,281    22,605       171,140
----------------------------------------------------------------------------
Goodwill                  2,819   57,624      35,724         -        96,167
----------------------------------------------------------------------------
Total assets            348,817  417,250     551,517    90,657     1,408,241
----------------------------------------------------------------------------
Total liabilities       123,924   84,030     196,768   328,357       733,079
----------------------------------------------------------------------------

----------------------------------------------------------------------------



                           As at and for the year ended December 31, 2012(4)
                            New                      Corporate
                        Markets Oilfield  Industrial and Other  Consolidated
----------------------------------------------------------------------------
Revenue                 188,837  181,067     356,305         -       726,209
Cost of sales (1)       121,085  119,535     315,831         -       556,451
----------------------------------------------------------------------------
Gross profit             67,752   61,532      40,474         -       169,758
Selling, general and
 administrative(2)            -        -           -   102,389       102,389
Net financing charges         -        -           -    13,357        13,357
----------------------------------------------------------------------------
Earnings before taxes    67,752   61,532      40,474  (115,746)       54,012
----------------------------------------------------------------------------
Property, plant and
 equipment
 expenditures            73,204   35,184      33,033    30,919       172,340
----------------------------------------------------------------------------
Goodwill                  2,819   57,631      42,165         -       102,615
----------------------------------------------------------------------------
Total assets            279,296  382,612     554,193   102,657     1,318,758
----------------------------------------------------------------------------
Total liabilities        73,938   56,958     164,962   381,460       677,318
----------------------------------------------------------------------------


1.  Cost of sales includes amortization of $52,259 for 2013 (New Markets
    $18,200, Oilfield $12,409 and Industrial $21,650) and $49,024 for 2012
    (New Markets $12,263, Oilfield $11,950 and Industrial $24,811).
2.  Selling, general and administrative includes amortization of $14,738 for
    2013 and $13,485 for 2012.
3.  Includes property, plant and equipment expenditures gross of disposals,
    decommissioning discount rate changes and foreign currency exchange
    differences.
4.  Prior year information has been restated to conform to current year
    presentation.

NOTE 23. PRIOR YEAR INFORMATION

Certain comparative figures have been reclassified to conform with the financial statement presentation adopted for the current year.

NOTE 24. SUBSEQUENT EVENTS

In the first quarter of 2014, Newalta initiated a restructuring plan which will reduce operating expenses and SG&A going forward. This decision is consistent with Newalta's ongoing strategy to improve productivity and profitability within the Industrial division and SG&A. Total costs related to restructuring operations will be determined as the plan is finalized. The restructuring plan and related costs are anticipated to be substantially realized by December 31, 2014.

Contacts:
Newalta Corporation
Anne M. Plasterer
Executive Director, Investor Relations
(403) 806-7019

Newalta Corporation
Stephanie MacVicar
Director, Investor Relations
(403) 806-7391
www.newalta.com

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