Newalta Continues Steady Growth in First Quarter 2011, Increases Dividend

CALGARY, ALBERTA - May 9, 2011 /CNW/ - Newalta Corporation ("Newalta") (TSX:NAL) today reported strong profitability gains in the first quarter ended March 31, 2011 on solid organic revenue growth in its Facilities and Onsite divisions. Reflecting its positive outlook and the momentum associated with its growth initiatives, Newalta also announced a 23 percent increase in its quarterly dividend to $0.08 per share.

Effective January 1, 2011, Newalta began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"). As such, prior year comparatives have been restated to reflect IFRS impacts. Please see page 25 of the attached MD&A for further details.

FINANCIAL RESULTS

                                                    Three months 
                                                  ended March 31,

($000s except per share data)                       2011    2010 % Increase
(unaudited)                                                       (Decrease)
----------------------------------------------------------------------------
Revenue                                          152,422 131,240         16
Gross Profit(2)                                   39,218  32,789         20
- % of revenue                                        26%     25%         4
Net earnings (loss)                                5,233   4,949          6
- per share ($) - basic                             0.11    0.10         10
- per share ($) - basic adjusted(3)                 0.21    0.14         50
- per share ($) - diluted                           0.11    0.10         10
Adjusted EBITDA(3)                                34,883  28,867         21
- per share ($)(3)                                  0.72    0.60         20
Cash from operations                               6,977  10,740        (35)
- per share ($)                                     0.14    0.22        (36)
Funds from operations(3)                          32,955  25,329         30
- per share ($)(3)                                  0.68    0.52         31
Maintenance capital expenditures(3)                2,473   3,048        (19)
Growth capital expenditures(3)                    10,810   5,585         94
Dividends declared                                 3,153   2,424         30
- per share ($)(3)                                 0.065    0.05         30
Dividends paid                                     3,152   2,424         30
Weighted average shares
 outstanding                                      48,495  48,480          -
Shares outstanding, March 31,                     48,509  48,487          -
----------------------------------------------------------------------------
(1) Management's Discussion and Analysis and Newalta's unaudited 
    consolidated financial statements and notes thereto are attached.

(2) Gross Profit is a Generally Accepted Accounting Policy ("GAAP") measure
    that was previously disclosed as Combined divisional net margin, a 
    non-GAAP measure under previous GAAP.

(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 48,508,911, shares outstanding as at May 9, 2011.

Management Commentary

"We opened 2011 with solid performance that reflects both stronger market conditions and increased operating efficiencies," said Al Cadotte, President and CEO of Newalta. "Profitability and return on capital continued to improve, with a 28% contribution to Adjusted EBITDA from incremental revenue."

"We expect the positive market trends we've seen so far this year to continue in the quarters ahead."

Dividend Increase

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 approved a 23 percent increase in the quarterly cash dividend to $0.08 per share ($0.32 per share annualized) from $0.065 per share ($0.26 per share annualized), starting with the dividend payable to shareholders of record as of June 30, 2011.

Divisional Highlights:

- Facilities Division first quarter 2011 revenue and gross profit(3) increased by 17% and 10% to $107.4 million and $28.4 million respectively, compared to last year, due primarily to strong contributions from Western Facilities. Lead volume gains at Ville Ste-Catherine ("VSC") were offset by a decline in event-based volumes at Stoney Creek Landfill ("SCL"). Increased drilling activity in western Canada drove an increase in volumes for Western Facilities, while VSC improved in line with strengthening market conditions. Commodity prices overall were only marginally higher compared to last year, and had little net impact on Facilities' performance. For Q2 2011, volumes at VSC are expected to be similar to Q1 2011 at 17,000 MT. SCL landfill volumes are anticipated to increase significantly to 180,000 MT in Q2 2011 from 150,000 MT in Q1 2011. Based on current customer demand, management expects that SCL volumes for the year will exceed 2010 volumes.

- Onsite Division first quarter 2011 revenue and gross profit increased 14% and 54% to $45.0 million and $10.8 million respectively, compared to the same period in 2010. Incremental revenue generated a 71% flow through to gross profit, primarily due to higher demand for drill site services. In Q2 2011, stronger onsite project activity is expected, including the resumption of a trial project using centrifuge processing capabilities on mature fine tailings.

Other Highlights:

- Adjusted EBITDA as a percent of revenue improved to 23% in the first quarter of 2011 from 22% last year. Trailing-twelve-month Adjusted EBITDA was $124.8 million at the end of Q1 2011.

- Adjusted SG&A (SG&A before stock-based compensation and amortization) was $14.9 million in Q1 2011, or 9.8% of revenue. This is in line with our target of maintaining these expenses at or below 10% of revenue.

- Net earnings in the quarter grew to $5.2 million compared to $4.9 million in Q1 2010 as growth in operational profitability more than offset higher stock-based compensation and deferred taxes.

- In 2011, our Technical Development team is in place and several promising technologies have progressed to the pilot phase as we continue to identify and develop new processes.

- Capital expenditures in 2011 are budgeted at $100 million, with $27 million of that total expected to be used for maintenance capital and $73 million for growth. Total capital expenditures will be funded from operations, with approximately 40% expected to be spent in the first half of 2011. During the first quarter, actual maintenance capital expenditures were $2.5 million, compared to $3.1 million in the corresponding period of 2010. Growth capital expenditures were $10.8 million, compared to $5.6 million in the first quarter of 2010.

Management will hold a conference call on Tuesday, May 10, 2011 at 4:00 p.m. (EST) to discuss Newalta's performance for the first quarter of 2011. To participate in the teleconference, please call 416-695-7848 or 800-769-8320. 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 Tuesday, May 17, 2011, by dialing 800-408-3053 and using the pass code 3035747 followed by the pound sign.

Newalta will hold its annual and special meeting of shareholders on Wednesday, May 11, 2011 at 2:00 p.m. Mountain Time.

Location: Newalta's corporate office, Building 'C'
220 - 12th Avenue, S.W.
Calgary, Alberta

For those unable to attend the annual and special meeting, the presentation will be webcast live at www.newalta.com and subsequently archived on Newalta's website.

About Newalta

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 85 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 the oil and gas, petrochemical, refining, lead, manufacturing and mining industries. The company has delivered strong, profitable growth for over 15 years and has established a leadership position in the industry with talented people, efficient and safe operations, innovative approaches and high ethical standards. Newalta trades on the TSX as NAL. For more information, visit www.newalta.com.

NEWALTA CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

Three months ended March 31, 2011 and 2010

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

- future operating and financial results;

- anticipated industry activity levels;

- expected demand for our services;

- business prospects and strategy;

- capital expenditure programs and other expenditures;

- the amount of dividends declared or payable in the future;

- realization of anticipated benefits of acquisitions, growth capital investments and our technical development initiatives;

- our projected cost structure; and

- expectations and implications of changes in legislation.

Such statements reflect 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 lead;

- 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;

- dependence on our senior management team and other operations management personnel with waste industry experience;

- the seasonal nature of our operations;

- success of our growth, acquisition and technical development strategies, including integration of businesses and processes into our operations and potential liabilities from acquisitions;

- the highly regulated nature of the waste management and environmental services business in which we operate;

- costs associated with operating our landfills and reliance on third party waste volumes;

- the competitive environment of our industry in Canada and the U.S.;

- risk of pending and future legal proceedings;

- our ability to attract and retain skilled employees and maintain positive labour union relationships;

- fluctuations in the costs and availability of fuel for our operations;

- open access for new industry entrants and the general unprotected nature of technology used in the waste industry;

- obtaining insurance for various potential risks and hazards on reasonable financial terms;

- possible volatility of the price of, and the market for, our common shares;

- the nature of, and market for, our debentures; and

- such other risks or factors described from time to time in reports we file with securities regulatory authorities.

By their nature, forward-looking statements 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 statements 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 statements 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 statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and the forward-looking statements in this document are expressly qualified by this cautionary statement. Unless otherwise required by law, we do not intend, or assume any obligation, to update these forward-looking statements.

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") 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 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, comprehensive income and retained earnings. 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 March 31,
($000s)                                               2011             2010
----------------------------------------------------------------------------
Net earnings                                         5,233            4,949
Add back (deduct):
 Current income taxes                                   26              128
 Deferred income taxes                               3,712            2,034
 Finance charges                                     7,027            6,737
 Amortization                                       13,944           13,015
----------------------------------------------------------------------------
EBITDA                                              29,942           26,863
----------------------------------------------------------------------------
Add back:
 Stock-based compensation                            4,941            2,004
----------------------------------------------------------------------------
Adjusted EBITDA                                     34,883           28,867
----------------------------------------------------------------------------
Weighted average number of shares                   48,495           48,480
----------------------------------------------------------------------------
EBITDA per share                                      0.62             0.55
----------------------------------------------------------------------------
Adjusted EBITDA per share                             0.72             0.60
----------------------------------------------------------------------------

"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. Stock-based compensation, a component of employee remuneration, can vary significantly with changes in the price of our common shares. 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 March 31,
($000s)                                               2011             2010
----------------------------------------------------------------------------
Net earnings                                         5,233            4,949
Add back (deduct):
 Stock-based compensation                            4,941            2,004
----------------------------------------------------------------------------
Adjusted net earnings                               10,174            6,953
----------------------------------------------------------------------------
Adjusted net earnings per share                       0.21             0.14
----------------------------------------------------------------------------

"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 GAAP. Funds from operations is derived from the consolidated statements of cash flows and is calculated as follows:

                                                Three months ended March 31,
($000s)                                               2011             2010
----------------------------------------------------------------------------
Cash from operations                                 6,977           10,740
Add back (deduct):
 Changes in non-cash working capital                25,780           14,312
 Decommissioning obligations incurred                  198              277
----------------------------------------------------------------------------
Funds from operations                               32,955           25,329
----------------------------------------------------------------------------
Weighted average number of shares                   48,495           48,480
----------------------------------------------------------------------------
Funds from operations per share                       0.68             0.52
----------------------------------------------------------------------------

"Return on capital" (ROC) is used to assist management and investors in measuring the returns realized from the capital employed.

                                                Three months ended March 31,
($000s)                                       Q1 2011 TTM       Q1 2010 TTM
----------------------------------------------------------------------------
Adjusted EBITDA                                   124,809            99,232

 Total Assets                                   1,060,866         1,015,326
 Current Liabilities                             (121,330)           89,163
----------------------------------------------------------------------------
Capital Employed                                  939,536           926,163
----------------------------------------------------------------------------
2-Year Net Assets Average(1)                      932,850           924,474
----------------------------------------------------------------------------
Return on Capital (%)                                13.4              10.7
----------------------------------------------------------------------------
(1) Q1 2010 TTM has been calculated using previous GAAP for Q2-Q4 2009 and
    GAAP for Q1 2010

Table 1: Trailing Twelve-Month Return on Capital

image/2011+05+09+q1nal.pdf

References to EBITDA, EBITDA per share, Adjusted EBITDA, Adjusted EBITDA per share, Adjusted net earnings, Adjusted net earnings per share, Funds from operations, Funds from operations per share and ROC throughout this document have the meanings set out above.

The following discussion and analysis should be read in conjunction with (i) the consolidated financial statements of Newalta, and the notes thereto, for the three months ended March 31, 2011, (ii) the consolidated financial statements of Newalta and notes thereto and MD&A of Newalta for the year ended December 31, 2010, (iii) the most recently filed Annual Information Form of Newalta and (iv) the consolidated interim financial statements of Newalta and the notes thereto and MD&A for the quarter ended March 31, 2010. This information is available at SEDAR (www.sedar.com). Information for the three months ended March 31, 2011, along with comparative information for 2010, is provided.

This MD&A is dated May 9, 2011, and takes into consideration information available up to that date. Throughout this document, unless otherwise stated, all currency is stated in Canadian dollars, MT is defined as "tonnes" or "metric tons".

FINANCIAL RESULTS AND HIGHLIGHTS

                                                    Three months 
                                                  ended March 31,

($000s except per share data)                       2011    2010 % Increase
(unaudited)                                                       (Decrease)
----------------------------------------------------------------------------
Revenue                                          152,422 131,240         16
Gross Profit(2)                                   39,218  32,789         20
- % of revenue                                        26%     25%         4
Net earnings (loss)                                5,233   4,949          6
- per share ($) - basic                             0.11    0.10         10
- per share ($) - basic adjusted(3)                 0.21    0.14         50
- per share ($) - diluted                           0.11    0.10         10
Adjusted EBITDA(3)                                34,883  28,867         21
- per share ($)(3)                                  0.72    0.60         20
Cash from operations                               6,977  10,740        (35)
- per share ($)                                     0.14    0.22        (36)
Funds from operations(3)                          32,955  25,329         30
- per share ($)(3)                                  0.68    0.52         31
Maintenance capital expenditures(3)                2,473   3,048        (19)
Growth capital expenditures(3)                    10,810   5,585         94
Dividends declared                                 3,153   2,424         30
- per share ($)(3)                                 0.065    0.05         30
Dividends paid                                     3,152   2,424         30
Weighted average shares
 outstanding                                      48,495  48,480          -
Shares outstanding, March 31,                     48,509  48,487          -
----------------------------------------------------------------------------
(1) Management's Discussion and Analysis and Newalta's unaudited 
    consolidated financial statements and notes thereto are attached.

(2) Gross Profit is a Generally Accepted Accounting Policy ("GAAP") measure
    that was previously disclosed as Combined divisional net margin, a 
    non-GAAP measure under previous GAAP.

(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 48,508,911, shares outstanding as at May 9, 2011.

NEWALTA

We provide cost-effective environmentally superior solutions to our customers' complex environmental needs. We leverage our existing talent and asset base to provide cost-effective solutions which reduce environmental impacts through recycling, recovery and reuse. These services are provided both through our network of 85 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 the oil and gas, petrochemical, refining, lead, manufacturing and mining industries. Newalta has delivered strong, profitable growth for over 15 years and has established a leadership position in the industry with talented people, efficient and safe operations, innovative approaches and high ethical standards.

OUR STRATEGY

In connection with the ongoing development of our strategy, the following are our principal strategic objectives, as well as the key underlying risks related thereto.

----------------------------------------------------------------------------
Strategic objectives                   Initiatives
----------------------------------------------------------------------------
1. Maximize Facilities Profitability   - Drive higher returns on existing 
                                         assets
                                       - Execute organic growth capital 
                                         projects
                                       - Expand Facilities service offering
                                       - Strategically construct integrated
                                         facilities and satellites

2. Recovery at Source                  - Increase market share in 
                                         short-term projects nationally
                                       - Identify short-term projects with
                                         long-term potential
                                       - Transition projects to long-term
                                         contract service arrangements

3. Process Commercialization           - Evaluate technologies for 
                                         commercial application
                                       - Advance identified technologies to
                                         the development and demonstration
                                         phase
                                       - Utilize facility network to 
                                         expedite commercialization
----------------------------------------------------------------------------

RISKS TO OUR STRATEGY

There are no significant changes and we do not anticipate any further material risks than those disclosed in our 2010 Annual Report. For the risks to our strategy, see page 20 of the MD&A for the year ended December 31, 2010.

CORPORATE OVERVIEW

Q1 2011 is our first quarter reporting under IFRS. There was no impact to previously reported Adjusted EBITDA; however, prior year comparatives have been restated to reflect IFRS impacts to the previously reported 2010 results. Comparative figures presented in this MD&A for 2009 were prepared in accordance with previous GAAP and are not required to be restated in accordance with IFRS. See page 25 of this MD&A for more information on the impact of adopting IFRS.

We continued to deliver steady year-over-year growth in Q1 2011, consistent with improved market conditions. Q1 2011 results strengthened over last year, with revenue up 16% to $152.4 million and Adjusted EBITDA up 21% to $34.9 million. Gross profit (previously Combined divisional net margin) and gross profit as a percentage of revenue continued to steadily improve. Gross profit as a percentage of revenue grew to 26% in Q1 2011, up from 25% in Q1 2010. Net earnings grew to $5.2 million compared to $4.9 million in Q1 2010 as growth in operational profitability was more than offset by higher stock-based compensation and deferred taxes. As a result, our gross debt (previously Total Secured and Unsecured Debt, see page 17 of this MD&A) to Adjusted EBITDA ratio improved to 2.61 from 3.32 in Q1 2010. The ongoing improvement in financial leverage continues to create greater financial flexibility for future growth.

In Facilities, Q1 2011 revenue and gross profit increased by 17% and 10%, respectively, compared to 2010. This was driven by strong contributions from our Western Facilities and Ville Ste-Catherine ("VSC"), offset by lower project work in Eastern Facilities. Growth in Western Facilities was driven by higher drilling activity in western Canada. VSC's higher sales volumes contributed to strong performance.

Onsite delivered strong results for the quarter due to higher drilling activity and steady improvements in Heavy Oil. Revenue and gross profit increased by 14% and 54%, respectively. Gross profit as a percentage of revenue was 24%, up from 18% in Q1 2010. Of the incremental revenue, 71% flowed through to gross profit.

Table 2: Trailing Twelve-Month Adjusted EBITDA

image/2011+05+09+q1nal.pdf

Capital expenditures for Q1 2011 were $13.3 million. Growth capital spending of $10.8 million related primarily to drill site equipment in Western Onsite, processing equipment for Heavy Oil contract work and facility expansion in Western Facilities. Maintenance capital expenditures of $2.5 million related primarily to routine process equipment improvements at facilities. Capital expenditures were funded by Funds from operations. We are on track to deliver the previously disclosed capital program for 2011 of $100 million, 40% of which is targeted for the first half of 2011.

Table 3: Revenue and Adjusted EBITDA

image/2011+05+09+q1nal.pdf

In 2011, our Technical Development team moves into the next phase of testing and assessing the most promising opportunities while continuing the global search for technologies. Compared to Q1 2010, our Research & Development operating expenditures tripled as our Technical Development program advanced. Several promising technologies have progressed to the testing phase and we have committed $1.0 million in growth capital in the first half of 2011 to continue the advancement of these projects. We are on track to spend our budgeted $5.0 million in growth capital this year.

OUTLOOK

In Q2 2011, we expect continued, ongoing improvements compared to Q2 2010. With the diversification of our customers in Onsite by both region and industry, we anticipate lower seasonal fluctuations in Q2. Crude oil and lead prices are anticipated to remain at levels consistent with Q1 2011 and our key markets continue to improve. Oil and gas drilling activity is expected to be impacted by normal seasonality but is expected to be stronger than Q2 2010. We anticipate sales volumes at VSC will be approximately 17,000 MT. Stoney Creek Landfill ("SCL") volumes are anticipated to be 180,000 MT, in line with Q2 2010, above the historical quarterly average of 155,000 MT. Based on current market activity and the number of projects being pursued, SCL volumes for the year are expected to exceed 2010 volumes. In Onsite, we expect continued growth from the increased demand for drill site equipment in the U.S., and to resume our trial project to use our centrifuge processing capabilities on mature fine tailings when weather permits in Q2 2011. Overall, we expect continued year-over-year growth in the quarters ahead as our markets strengthen and we realize returns from our 2010 growth investments.

The Board of Directors also approved a 23% increase in the quarterly cash dividend to $0.08 per share from $0.065 per share ($0.32 per share versus $0.26 per share per annum), starting with the dividend payable to shareholders of record as of June 30, 2011.

We enter Q2 2011 with more robust markets which will drive improved performance. We expect return on capital to continue to climb toward our historical average of 18%. We remain confident that we will deliver attractive returns to our shareholders in the quarters ahead.

RESULTS OF OPERATIONS - FACILITIES DIVISION

Overview

Facilities includes an integrated network of more than 55 facilities located to service key market areas across Canada employing over 900 people. This division features Canada's largest lead-acid battery recycling facility, located at VSC, an engineered non-hazardous solid waste landfill located at SCL, and over 25 oilfield facilities throughout western Canada. Facilities is organized into the Western Facilities, Eastern Facilities and VSC business units.

The business units contributed the following to division revenue:

                                                Three months ended March 31,
                                                      2011             2010
----------------------------------------------------------------------------
Western Facilities                                      49%              47%
Eastern Facilities                                      20%              22%
VSC                                                     31%              31%
----------------------------------------------------------------------------

Table 4: Facilities Revenue and Facilities Gross Profit

image/2011+05+09+q1nal.pdf

The following table compares Facilities' results for the periods indicated:

                                                      Three months 
                                                    ended March 31,
($000s)                                               2011    2010 % change
----------------------------------------------------------------------------
Revenue(1)                                         107,406  91,749       17
Cost of Sales(2)                                    78,991  65,963       20
----------------------------------------------------------------------------
Gross Profit                                        28,415  25,786       10
----------------------------------------------------------------------------
Gross Profit as % of revenue                            26%     28%      (7)
----------------------------------------------------------------------------
Maintenance capital                                  1,482   1,702      (13)
----------------------------------------------------------------------------
Growth capital                                       4,339     451      862
----------------------------------------------------------------------------
Assets employed(3)                                 586,066 556,706        5
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Includes $0 in internal revenue in Q1 2011 and $157 in Q1 2010.
(2) Includes amortization of $7,737 for 2011 and $7,077 for 2010.
(3) "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.

Compared to Q1 2010, revenue and gross profit grew by 17% and 10%, respectively, due to contributions from our Western Facilities and VSC. The steady pace of increased performance was consistent with improved oil and gas industry activity and stronger demand for our products. For Q1 2011, gross profit as a percentage of revenue was 26% compared to 28% in Q1 2010. The change in gross profit as a percentage of revenue was primarily driven by the timing of event-based business at SCL.

The implementation of IFRS did not result in a material change to the 2010 Facilities gross profit. Gross profit was increased by the reclassification of the unwinding of the discount related to the decommissioning liability to finance charges but offset by an increase in depreciation expense.

Western Facilities

Western Facilities are located in British Columbia, Alberta and Saskatchewan and generate revenue from:

- the processing of industrial and oilfield-generated wastes including: collection; treatment; water disposal; clean oil terminalling; custom treating and landfilling

- sale of recovered crude oil for our account

- oil recycling, including the collection and processing of waste lube oils and the sale of finished products

Western Facilities draws its revenue primarily from industrial waste generators and the oil and gas industry. Waste generated by the oil and gas industry is affected by volatility in the price of crude oil and natural gas and drilling activity. Drilling activity will impact the volume of waste received and the makeup of that waste. Changes in the waste mix will impact the amount of crude oil recovered to our account. Historically, for oilfield facilities, approximately 75% of our waste volume relates to ongoing production resulting in a fairly stable revenue base. Volatility in the price of crude oil impacts crude oil revenue. Fluctuations in the Canadian/U.S. dollar exchange rate impact U.S. dollar sales, which account for approximately 15% of Western Facilities revenue. Changes in environmental regulations in western Canada also impact our business. Management is not aware of any new legislation proposed that is expected to have a material impact on our business and, regardless, we tend to have a positive bias to change in environmental regulations.

Western Facilities Q1 2011 revenue increased by 21% compared to Q1 2010 largely due to increased oil and gas activity. Waste processing volumes increased by 36% in Q1 2011 over Q1 2010. This increase was driven by oil and gas activity split equally between rig and production-related activity. Crude oil recovered was flat due to a change in the waste mix towards production-related waste with lower oil content.

                                                      Three months 
                                                    ended March 31,
                                                  2011        2010 % change
----------------------------------------------------------------------------
Waste processing volumes ('000 m(3))             150.3       110.3       36
Recovered crude oil ('000 bbl)(1)                   59          59        0
Average crude oil price received (CDN$/bbl)      81.65       75.60        8
Recovered crude oil sales ($ millions)             4.8         4.4        9
Edmonton par price (CDN$/bbl)(2)                 88.03       80.01       10
----------------------------------------------------------------------------

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

Table 5: Waste Processing Volumes - Western Facilities and Recovered Crude - Western Facilities

image/2011+05+09+q1nal.pdf

Eastern Facilities

Eastern Facilities is comprised of facilities in Ontario, Québec and Atlantic Canada, and includes an engineered non-hazardous solid waste landfill located in Stoney Creek, Ontario. Eastern revenue is primarily derived from:

- the processing of industrial wastes, including collection, treatment and disposal

- SCL, an engineered non-hazardous solid waste landfill with an annual permitted capacity of 750,000 MT of waste per year

Eastern Facilities 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. The broad customer and industry base helps to diversify risk; however, the state of the economy as a whole will affect these industries. In addition, Eastern Facilities is sensitive to changing environmental regulations regarding waste treatment and disposal. Management is not aware of any new environmental regulatory reviews underway that are expected to have a material effect on Newalta and, regardless, we tend to have a positive bias to change in environmental regulations.

In Q1 2011 revenue was flat to Q1 2010. Improvement in our Eastern Facilities revenue was offset by the timing of event-based business at SCL. However, we anticipate that Q2 2011 landfill volumes will be in line with Q2 2010, higher than the historical average of 155,000 MT. Based on current market activity and the number of projects being pursued, volumes for the year at SCL are expected to exceed 2010 volumes.

                                                      Three months 
                                                    ended March 31,
                                                  2011        2010 % change
----------------------------------------------------------------------------
SCL Volume Collected ('000 MT)                   149.7       195.2      (23)
----------------------------------------------------------------------------

Table 6: SCL - Volume Collected

image/2011+05+09+q1nal.pdf

Ville Ste-Catherine ("VSC")

VSC is our lead-acid battery recycling facility. This facility generates revenue from a combination of direct lead sales and tolling fees received for processing batteries. Fluctuations in the price of lead affect our direct sales revenue and waste battery procurement costs. Tolling fees are generally fixed, reducing our exposure to fluctuations in lead prices. The cost to acquire waste batteries is generally related to the trading price of lead at the time of purchase. As a result of the shipping, processing and refining of lead, there is a lag between the purchase and final sale of lead. Slow and modest changes in the value of lead result in a relatively stable differential between the price received for recycled lead and the cost to acquire lead acid waste batteries. However, sharp short-term swings in the LME price can distort this relationship, resulting in a temporary disconnect in values.

Our objective is to ensure optimal performance at VSC, which historically has meant balancing direct sales and tolling volumes equally. In 2010, our split was 50/50. Production volumes will be managed to optimize performance under prevailing market conditions. In addition, fluctuation in the U.S./Canadian dollar exchange rate impacts revenue and procurement. Substantially all of VSC's revenue and the majority of our battery procurement costs are denominated in U.S. dollars, with the balance of our operating costs denominated in Canadian dollars.

VSC revenue in Q1 2011 increased by 18% compared to Q1 2010 due to higher sales volumes. Total lead volume sold increased by 15% to 18,100 MT. Lagged lead prices in Canadian dollars were marginally up as the impact of higher lead pricing in U.S. dollars was offset by the movement in the exchange rate. Battery procurement costs remained in line with management expectations for the quarter.

We anticipate Q2 2011 production to be approximately 17,000 MT. We will continue to manage production volumes to capitalize on market conditions and maximize returns.

RESULTS OF OPERATIONS - ONSITE DIVISION

Overview

Onsite includes a network of 25 facilities with over 650 employees across Canada and the U.S. Onsite services involves the mobilization of equipment and our people to manage industrial by-products at our customer sites. Onsite includes: the processing of oilfield-generated wastes and the sale of recovered crude oil for our account; industrial cleaning; site remediation; dredging and dewatering; and drill site processing, including solids control and drill cuttings management. Onsite includes the Western Onsite, Eastern Onsite and Heavy Oil business units.

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: typically evolve from projects and are non-seasonal arrangements based on fee for service solutions with terms longer than one year and no direct commodity price exposure.

In addition, Onsite performance is affected by the customer's requirement for Newalta to maintain a strong safety record. To address this requirement, our EH&S team works with our people and our customers to develop an EH&S culture and prevention strategy owned by operators to ensure we maintain our strong record.

The business units contributed the following to division revenue:

                                                Three months ended March 31,
                                                      2011             2010
----------------------------------------------------------------------------
Western Onsite                                          50%              38%
Eastern Onsite                                          15%              26%
Heavy Oil                                               35%              36%
----------------------------------------------------------------------------

Table 7: Onsite Revenue and Onsite Gross Profit

image/2011+05+09+q1nal.pdf

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

                                                      Three months 
                                                    ended March 31,
($000s)                                           2011        2010 % change
----------------------------------------------------------------------------
Revenue - external                              45,016      39,648       14
Cost of Sales(1)                                34,213      32,645        5
----------------------------------------------------------------------------
Gross Profit                                    10,803       7,003       54
----------------------------------------------------------------------------
Gross Profit as % of revenue                        24%         18%      33
----------------------------------------------------------------------------
Maintenance capital                                631       1,039      (39)
----------------------------------------------------------------------------
Growth capital                                   4,345       2,536       71
----------------------------------------------------------------------------
Assets employed(2)                             254,710     240,780        6
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Includes amortization of $3,394 for 2011 and $3,316 for 2010
(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.

In Q1 2011, revenue and gross profit increased by 14% and 54%, respectively, over Q1 2010. Gross profit as a percentage of revenue increased to 24% compared to 18% last year. Incremental revenue drove a 71% flow through to net margin, due primarily to higher utilization of equipment resulting from higher drilling activity.

The implementation of IFRS did not result in a material change to the 2010 Onsite gross profit. Gross profit was increased by the reclassification of the unwinding of the discount related to the decommissioning liability to finance charges but offset by an increase in depreciation expense.

Western Onsite

Revenue is primarily generated from:

- the supply and operation of drill site processing equipment, including equipment for solids control and drill cuttings management throughout western Canada and the U.S.

- onsite service in western Canada (excluding services provided by Heavy Oil) includes: industrial cleaning; site remediation; centrifugation; and dredging and dewatering

- environmental services serving primarily oil and gas customers

Western Onsite performance is primarily affected by fluctuations in drilling activity in western Canada and the U.S. We can also be impacted by the competitive environment. To address these risks, we have developed a strong customer partnership approach and service differentiation to secure Newalta brand loyalty. Other onsite services for this business unit 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. Western Onsite is also affected by market conditions in various other industries, including pulp and paper, refining, mining and municipal dewatering.

Q1 2011 Western Onsite revenue improved by 51% compared to Q1 2010, consistent with increasing drilling activity in both western Canada and the U.S. Our utilization rate for drill site equipment rose to 62% from 53% in Q1 2010. Improved utilization was driven by higher demand in both the U.S. and Canada with utilization rates for Q1 2011 of 61% and 65%, respectively. Increased activity in the Marcellus and Fayetteville shale gas plays strengthened U.S. demand while increasing activity in the Cardium oil play drove recovery in Canadian demand.

Our utilization rate for drill site equipment is based on days in use. Taking into account mobilization/demobilization and travel from rig site to rig site, we anticipate our maximum practical utilization to be 75%. This is based on current equipment allocations between the U.S. and Canada.

Balancing our fleet equally between the U.S. and Canadian markets enables us to capitalize on increased demand in both regions. We anticipate continued growth year-over-year in this business unit, consistent with increased drilling activity in both Canada and the U.S. and additional onsite project work.

Eastern Onsite

Eastern Onsite revenue is derived from:

- onsite service in eastern Canada, including: industrial cleaning; centrifugation; and dredging and dewatering

- a fleet of specialized vehicles and equipment for emergency response and onsite processing

Eastern Onsite services a broad range of industries in eastern Canada; however, these industries are sensitive to the state of the economy in these regions. Eastern Onsite is in the early stage of development as we have only been developing this business unit for one year.

We are currently engaged primarily in short-term, or event-based projects, which will vary from quarter-to-quarter. Revenue was down quarter-over-quarter; however, since East Onsite is in the early stage of development, the impact on the division was minimal.

Heavy Oil

Our heavy oil services business began 15 years ago with facilities at Hughenden and Elk Point, Alberta. This business has expanded from processing heavy oil in our facility network to operating equipment on customers' sites. Leveraging our facilities as staging areas, we deliver a broad range of specialized services at numerous customer sites. Heavy Oil revenue is generated by facilities services which includes the processing and disposal of oilfield-generated wastes, including water disposal and landfilling as well as the sale of recovered crude oil for our account. The balance of Heavy Oil revenue is generated from specialized onsite services for heavy oil producers under projects and contracts.

Heavy Oil facility revenue has an established customer base; however, performance is affected by the amount of waste generated by producers and the sale of crude oil recovered to our account. These streams vary due to volatility in the price of heavy oil and drilling activity. To address this volatility, over the past four years we have worked with customers to develop specialized onsite services where revenue is based on processed volumes, eliminating our exposure to crude oil prices for these services. In addition, these services create cost savings and more environmentally beneficial solutions for our customers. Growth in the business unit will come from our ability to attract and retain customers with new heavy oil operations coming on stream.

In Q1 2011, Heavy Oil revenue increased by 10% compared to Q1 2010. The main driver was the increase from Heavy Oil Onsite projects and contracts. In Q4 2010, we completed the first phase of a project to use our centrifuge processing capabilities on mature fine tailings. This project is expected to resume in Q2 2011 and continue into Q3 2011. In 2011, to date we have 8 contracts, 6 of which were operating in Q1 2011. The remaining 2 contracts are in construction. In addition, we have 6 outstanding contract proposals.

                                                      Three months 
                                                    ended March 31,
                                                  2011        2010 % change
----------------------------------------------------------------------------
Waste processing volumes ('000 m(3))               134         124        8
Recovered crude oil ('000 bbl)(1)                   48          42       14
Average crude oil price received (CDN$/bbl)      62.48       66.05       (5)
Recovered crude oil sales ($ millions)             3.0         2.7       11
Bow River Hardisty (CDN$/bbl)(2)                 76.47       75.20        2
----------------------------------------------------------------------------

(1) Represents the total crude oil recovered and sold for our account.
(2) Bow River Hardisty is an industry benchmark for heavy crude oil.

Table 8: Waste Processing Volumes - Heavy Oil and Recovered Crude - Heavy Oil

image/2011+05+09+q1nal.pdf

CORPORATE AND OTHER
                                                      Three months 
                                                    ended March 31,
($000s)                                           2011        2010 % change
----------------------------------------------------------------------------
Selling, general and administrative expenses    22,637      18,748       21
("SG&A")
 Less:
  Stock-based compensation                       4,941       2,004      147
  Amortization                                   2,813       2,622        7
----------------------------------------------------------------------------
Adjusted SG&A                                   14,883      14,122        5
 Adjusted SG&A as a % of revenue                   9.8%       10.8%      (9)
----------------------------------------------------------------------------

IFRS requires that amortization of corporate assets be included in SG&A expenses. The above table removes stock-based compensation and amortization from SG&A to provide improved continuity with respect to the comparison of our results.

For Q1 2011, Adjusted SG&A improved to less than 10% of revenue. This reflects our disciplined approach to managing SG&A as our revenue base increases. Stock-based compensation increase was driven by the rise in our share price to $12.91 at the end of Q1 2011 from $11.89 at the end of 2010. Increases in our share price will continue to drive stock-based compensation. Approximately 60% of stock-based compensation expense is estimated to be settled with equity, with the balance to be settled in cash. Stock-based compensation grants outstanding at March 31, 2011 that settle only in cash had a weighted average remaining life of approximately four years with a weighted average exercise price of $8.74. For Q2 2011, we anticipate Adjusted SG&A to be at or below $16 million.

                                                      Three months 
                                                    ended March 31,
($000s)                                           2011        2010 % change
----------------------------------------------------------------------------
Research and development                           583         193      202
 Research and development as a % of revenue        0.4%        0.1%     300
----------------------------------------------------------------------------

Research and development expenses are related to our Technical Development group. Compared to Q1 2010, our operating expenditures tripled as our Technical Development program advanced. Technical Development's operating budget remains at $3.0 million for 2011, to develop and commercialize technologies into our operations.

                                                      Three months 
                                                    ended March 31,
($000s)                                           2011        2010 % change
----------------------------------------------------------------------------
Bank fees and interest                           1,630       3,909      (58)
Debentures interest and accretion of 
 issue costs(1)                                  4,863       2,336      108
----------------------------------------------------------------------------
Finance charges before unwinding of 
 the discount(2)                                 6,493       6,245        4
Unwinding of the discount(2)                       534         492        9
----------------------------------------------------------------------------
Finance charges                                  7,027       6,737        4
----------------------------------------------------------------------------
(1) Includes convertible debentures and senior unsecured debentures.
(2) Related to decommissioning liability.

IFRS Finance charges includes unwinding of the discount related to the decommissioning liability. Under previous GAAP, it was included in amortization and accretion expense.

Finance charges before unwinding of the discount related to the decommissioning liability for the quarter are relatively flat to the same period in 2010, primarily due to lower average senior debt offset by higher interest rates. Finance charges associated with the Convertible Debentures include an annual coupon rate of 7% as well as the accretion of issue costs and the discount on the debt portion of the Convertible Debentures. Finance charges associated with the Series 1 Unsecured Debentures ("Senior Unsecured Debentures") include an annual coupon rate of 7.625% and the accretion of issue costs. The Senior Unsecured Debentures were issued November 23, 2010. See "Liquidity and Capital Resources" in this MD&A for discussion of our long-term borrowings.

                                                      Three months 
                                                    ended March 31,
($000s)                                           2011        2010 % change
----------------------------------------------------------------------------
Current tax                                         26         128      (80)
Deferred tax                                     3,712       2,034       82
----------------------------------------------------------------------------
Provision for income taxes                       3,738       2,162       73
----------------------------------------------------------------------------

The increase in future income tax expense for the quarter compared to 2010 is primarily due to higher taxable income. The effective tax rate for the quarter increased to 41.7% in 2011 compared to 30.4% in 2010. The increase in the effective tax rate resulted from higher non-deductible costs related to stock options in 2011. Loss carry forwards are approximately $167 million at March 31, 2011. Other than provincial capital taxes and U.S. state and federal income taxes, we do not anticipate paying significant income tax for at least three years. See "Critical Accounting Estimates - Income Taxes" in this MD&A for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

The term liquidity refers to the speed with which a company's assets can be converted into cash, as well as cash on hand. Our liquidity risk may arise from 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 risk management, refer to Note 14 to the unaudited consolidated financial statements for the quarter ended March 31, 2011.

Our debt capital structure is as follows:

($000s)                                    March 31, 2011 December 31, 2010
----------------------------------------------------------------------------
Use of Credit Facility:
Amount drawn on Credit Facility(1)                 64,154            53,860
Senior Unsecured Debentures                       125,000           125,000
Letters of credit                                  21,477            21,477
----------------------------------------------------------------------------
Total Debt                               A        210,631           200,337
Unused Credit Facility capacity(2)                114,369           124,663
----------------------------------------------------------------------------
Convertible Debentures                   B        115,000           115,000
----------------------------------------------------------------------------
Gross Debt(3)                         =A+B        325,631           315,337
----------------------------------------------------------------------------

(1) See Note 5 to the consolidated financial statements for the quarter 
    ended March 31, 2011. The net senior secured debt at March 31, 2011 
    was $62 million.

(2) Management elected to reduce our borrowing capacity to $200 million on
    December 17, 2010 from $350 million.

(3) Previously described as Total Secured and Unsecured Debt.

We continue to focus on managing our working capital accounts while supporting our growth. Working capital at March 31, 2011 increased to $36.9 million from $17.1 million at December 31, 2010, due to increased activity levels and timing of receipts and payments. Days' sales outstanding in receivables have increased compared to year end and accounts receivable over 90 days of $1.4 million has decreased in line with market conditions.

At current activity levels, working capital is expected to be sufficient to meet our ongoing commitments and operational requirements of the business. We will continue to manage working capital prudently with increasing activity levels.

For further information on credit risk management, please refer to Note 14 to the unaudited consolidated financial statements for the quarter ended March 31, 2011.

DEBT RATINGS

DBRS Limited ("DBRS") and Moody's Investor Service, Inc. ("Moody's") provided a corporate and Series 1 Unsecured Debentures credit rating on November 10, 2010. There has been no change to these ratings. For further detail, see page 35 of the MD&A for the year ended December 31, 2010.

SOURCES OF CASH

Our liquidity needs can be sourced in several ways including: Funds from operations, borrowings against 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, proceeds from the sale of assets and payments of dividends to shareholders.

Credit Facility

The Credit Facility was amended effective December 17, 2010 to a three-year maturity ending December 17, 2013, with annual extensions available at our option. As a result of Newalta's recent successful private placement of $125 million in Senior Unsecured Debentures and current cash forecast needs, management elected to reduce the amount available under the Credit Facility from $350 million to $200 million. At March 31, 2011, $114.4 million was available and undrawn under the Credit Facility 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 agreement, surety bonds (including performance and bid bonds) to a maximum of $125 million are excluded from the definition of Total Debt. As at March 31, 2011, surety bonds issued and outstanding totalled $21.5 million.

Financial performance relative to the financial ratio covenants(1) under the Credit Facility is reflected in the table below. There is no impact on our covenants for changes due to IFRS.

                                              March 31, 2011      Threshold
----------------------------------------------------------------------------
Senior Secured Debt(2) to EBITDA(3)                   0.69:1 2.75:1 maximum
Total Debt(4) to EBITDA(3)                            1.69:1 3.50:1 maximum
Interest Coverage                                     5.20:1 2.25:1 minimum
----------------------------------------------------------------------------

(1) We are restricted from declaring dividends if we are in breach of the
    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 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
    and the Senior Unsecured Debentures, but excludes the existing $115
    million Convertible Debentures.

Table 9: Gross Debt to Adjusted EBITDA

image/2011+05+09+q1nal.pdf

Our Gross Debt was $325.6 million as at March 31, 2011 which reflected a $10.3 million increase over December 31, 2010. As a result of the higher Adjusted EBITDA, Gross Debt to Adjusted EBITDA ratio improved to 2.61. The ongoing improvement provides Newalta with greater financial flexibility and will reduce future financing costs. Our target for Gross Debt to Adjusted EBITDA ratio remains under 2.0. Our covenant ratios remained well within their thresholds. We will manage within our covenants throughout 2011.

Convertible Debentures

The Convertible Debentures have a maturity date of November 30, 2012 and bear interest at a rate of 7.0% payable semi-annually in arrears on May 31 and November 30 each year. Each $1,000 debenture is convertible into 43.4783 shares, at a conversion price of $23.00 per share, at any time at the option of the holders of the Convertible Debentures. The Convertible Debentures are not included in calculating financial covenants in the Credit Facility and there were no redemptions of the Convertible Debentures in Q1 2011.

Management anticipates the redemption of the convertible debentures within the November 30, 2011 to November 30, 2012 time period, and is exploring refinancing alternatives.

Senior Unsecured Debentures

On November 23, 2010, Newalta issued $125.0 million of 7.625% Senior Unsecured Debentures. The Senior Unsecured Debentures mature on November 23, 2017. The Senior Unsecured Debentures bear interest at 7.625% per annum and such interest is payable in equal installments semi-annually in arrears on May 23 and November 23 in each year, commencing on May 23, 2011. The Senior Unsecured 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 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 requires Newalta to be in compliance with certain covenants on an annual basis. At March 31, 2011, Newalta was in compliance with all covenants.

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.

Capital expenditures for the quarter ended March 31, 2011 were:

                                               Three months ended March 31,
($000s)                                              2011             2010
---------------------------------------------------------------------------
Growth capital expenditures                        10,810            5,585
Maintenance capital expenditures                    2,473            3,048
---------------------------------------------------------------------------
Total capital expenditures(1)                      13,283            8,633
---------------------------------------------------------------------------

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

Total capital expenditures for the quarter were $13.3 million. Growth capital expenditures for the quarter relate primarily to drill site equipment in Western Onsite, centrifugation equipment for contract work in our Heavy Oil business unit and expansion in Western Facilities. Maintenance capital expenditures for the quarter related primarily to process equipment improvements at facilities. Capital expenditures were funded by Funds from operations.

We are on track to deliver our capital program for 2011 of $100 million, 40% of which is targeted for the first half of 2011.

Growth capital expenditures for corporate initiatives remains at $7 million for the year. A significant portion of this relates to our ongoing development and expansion of SAP in support of our business growth.

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.

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 $3.2 million in dividends, or $0.065 per share, paid April 15, 2011 to shareholders of record as at March 31, 2011.

The Board of Directors also approved a 23% increase in the quarterly cash dividend to $0.08 per share from $0.065 per share ($0.32 per share versus $0.26 per share per annum), starting with the dividend payable to shareholders of record as of June 30, 2011.

As at May 9, 2011, Newalta had 48,508,911 shares outstanding, outstanding options to purchase up to 3,498,575 shares and a number of shares that may be issuable pursuant to the $115.0 million in Debentures (see Sources of Cash - Debentures on page 17 of the MD&A for the quarter ended March 31, 2011).

Contractual Obligations

For the three months ended March 31, 2011, there were no significant changes in our contractual obligations. For a summary of our contractual obligations, see page 39 of the MD&A for the year ended December 31, 2010.

SUMMARY OF QUARTERLY RESULTS
                                                            IFRS

($000s except per share data)          2011                 2010
                                         Q1      Q4      Q3      Q2      Q1 
----------------------------------------------------------------------------
Revenue                             152,422 162,927 145,124 136,905 131,240
Earnings (loss) before taxes          8,971   5,368   8,926   3,894   7,111
Net earnings (loss)                   5,233   2,921   5,868   2,386   4,949 
Earnings (loss) per share ($)          0.11    0.06    0.12    0.05    0.10
Diluted earnings (loss) per            
 share ($)                             0.11    0.06    0.12    0.05    0.10
Weighted average shares -
 basic                               48,495  48,523  48,487  48,487  48,480
Weighted average shares -
 diluted                             48,949  48,934  48,909  48,844  48,826
EBITDA                               29,942  26,810  28,470  25,598  26,863 
Adjusted EBITDA                      34,883  33,647  29,705  26,573  28,867
----------------------------------------------------------------------------

SUMMARY OF QUARTERLY RESULTS

                                                      Canadian GAAP

($000s except per share data)                                       2009
                                                        Q4       Q3      Q2
----------------------------------------------------------------------------
 Revenue                                          137,308   122,169 111,386
 Earnings (loss) before taxes                       3,451     5,936    (293)
 Net earnings (loss)                                4,092     3,567    (179)
 Earnings (loss) per share ($)                       0.09      0.08       -
 Diluted earnings (loss) per share ($)               0.09      0.08       -
 Weighted average shares -
  basic                                            46,770    42,438  42,450
 Weighted average shares -
  diluted                                          47,049    42,610  42,450
 EBITDA                                            24,698    25,253  17,940
 Adjusted EBITDA                                   25,506    26,606  18,253
----------------------------------------------------------------------------

Quarterly performance is affected by, among other things, weather conditions, timing of onsite projects, commodity prices, foreign exchange rates, market demand and the timing of our growth capital investments as well as acquisitions and the contributions from those investments. Growth capital investments completed in the first half of the year will tend to strengthen the second half financial performance. 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 Onsite business unit due to the aqueous nature of work performed, as well as potentially by fluctuations in commodity prices or event-based waste receipts at SCL. As experienced over the last eight quarters, fluctuations in commodity prices can dramatically impact our results.

Improvements throughout 2009 were driven by a combination of stronger commodity prices and management's cost containment program. In Q3 2009, we observed improved commodity prices and typical seasonal activity increases; however, our waste volumes remained below historic levels. Revenue in Q4 2009 improved due to higher commodity prices, better waste receipts at SCL and increased lead production at VSC. Weighted average shares increased reflecting the equity offering of 6 million shares completed in Q4 2009.

Q1 2010 revenue, earnings before taxes and net earnings reflect continued improvements in commodity prices and productivity and cost efficiencies combined with strengthened demand across all business units. Q2 2010 revenue, earnings before taxes and net earnings reflect continued recovery in activity levels, consistent with expectations. Q3 2010 revenue, earnings before taxes and net earnings improved. Strong performance in Western Facilities, Heavy Oil and Western Onsite was partially offset by lower contributions from VSC, SCL and Eastern Onsite. Q4 2010 revenue and Adjusted EBITDA continued to improve driven by strong market activity in Western Facilities and increased demand for Western Onsite services. The Q4 2010 decrease in earnings before taxes and net earnings was due to higher stock-based stock compensation.

Q1 2011 revenue, Adjusted EBITDA, earnings before taxes and net earnings reflect continued steady improvement in line with market conditions.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

SENSITIVITIES

Our stock-based compensation expense is sensitive to changes in our share price. A $1 change in our share price, between $12 per share and $20 per share, has a $3.3 million direct impact on annual stock-based compensation reflected in SG&A, before the effects of vesting. We anticipate that approximately 40% of stock-based compensation will be settled in cash in future periods.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements in accordance with IFRS requires management to make estimates with regard to the reported amounts of revenue and expenses and the carrying values of assets and liabilities. These estimates are based on historical experience and other factors determined by management. Because this involves varying degrees of judgment and uncertainty, the amounts currently reported in the financial statements could, in the future, prove to be inaccurate. With the adoption of IFRS, these critical accounting estimates have been updated accordingly.

Amortization

Amortization of capital assets and intangible assets incorporates estimates of useful lives and residual values. These estimates may change as more experience is obtained or as general market conditions change impacting the operation of plant and equipment.

Decommissioning Liability and Accretion

Decommissioning liability is estimated by management based on the anticipated costs to abandon and reclaim all our facilities and landfills as well as the projected timing of the costs to be incurred in future periods. Management, in consultation with Newalta's engineers, estimates these costs based on current regulations, costs, technology and industry standards. The fair value estimate is capitalized as part of the cost of the related asset and amortized to expense over the asset's useful life. The useful lives of the assets and the long-term commitments of certain sites range from 20 to 300 years. The total estimated future cost for asset retirement obligations at March 31, 2011 was $9.8 billion. The net present value of this amount, $54.7 million (using a discount rate of 4%), has been accrued on the consolidated balance sheet at March 31, 2011. The majority of the undiscounted future asset retirement obligations relates to SCL in Ontario, which are expected to be incurred over the next 300 years. Excluding SCL, the total undiscounted future costs are $36.1 million. There were no significant changes in the estimates used to prepare the asset retirement obligation in 2011 compared to 2010.

Unwinding of the discount related to the decommissioning liability is a result of the increase in the asset retirement obligation over time. The asset retirement obligation is based on estimates that may change as more experience is obtained or as general market conditions change impacting the future cost of abandoning our facilities.

Impairment

We perform an asset impairment test at each balance sheet date and whenever events or circumstances make it possible that impairment may have occurred. Determining whether impairment has occurred requires a valuation of the respective cash generating unit based on its future discounted cash flows. In applying this methodology we rely on a number of factors, including: actual operating results; future business plans; economic projections; and market data.

Our determination as at December 31, 2010 and March 31, 2011 was that there was no impairment.

Income Taxes

Current income tax expense predominantly represents capital taxes paid in eastern Canada, federal and provincial income taxes and U.S. taxation imposed on the U.S. subsidiary. Tax losses generated under the income fund structure are expected to provide shelter from any significant corporate current tax exposure for a minimum of three years.

Deferred taxes are estimated based on temporary differences between the book value and tax value of assets and liabilities using the applicable future income tax rates under current law. The change in these temporary differences results in a future income tax expense or recovery. The applicable future income tax rate for each entity is calculated based on provincial allocation calculations and the expected timing of reversal of temporary differences. Changes in the assumptions used to derive the future income tax rate could have a material impact on the future income tax expense or recovery incurred in the period.

Permits and other intangibles

Permits and other intangibles represent the book value of expiring permits and rights, indefinite permits and non-competition contracts. The intrinsic value of the permits relates to the breadth of the terms and conditions and the types of waste we are able to process. In today's regulatory environment, management believes an operator would be unable to obtain similar permits with the same scope of operations. Therefore, management estimates that the value of our permits could be greater than its book value.

Stock-Based Compensation

We have three share-based compensation plans, the 2003 Option Plan (the "2003 Plan"), the 2006 Option Plan (the "2006 Plan") and the 2008 Option Plan (the "2008 Plan"). Under the option plans, 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.

The 2003 Plan is an equity-settled plan where the fair value of options 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, 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.

The 2006 Plan and the 2008 Plan allow for individuals to settle their options in cash. Accordingly, 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. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

We may also grant stock appreciation rights ("SARs") to directors, officers, employees and consultants of Newalta Corporation 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. SARs generally expire five years after they have been 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 share-based compensation expense recognized over the vesting period of the options. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

Newalta has a cash-settled deferred share unit ("DSUs") plan for which 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 with a corresponding increase in liabilities over the vesting period of the units. 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.

A cash-settled Performance Share Unit ("PSUs") incentive plan has been established for officers and other eligible employees. Under this plan, notional PSUs are granted upon commencement in the plan and vest at the end of a three-year term. The vested PSUs are automatically paid out in cash upon vesting at a value determined by the fair market value of Shares at December 31 of the vesting year and based on the number of PSUs held 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 PSUs. The fair value of the PSUs is accrued in accounts payable and charged to earnings on a straight-line basis over the three-year term. This estimated value is adjusted each period based on the period-end trading price of the Corporation's 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.

A cash-settled Restricted Share Unit ("RSUs") incentive plan has been established for officers and other eligible employees. Under this plan, notional RSUs are granted upon commencement in the plan and vest annually over a two-year term or immediately upon termination of employment by a participant. Upon vesting, RSUs are automatically paid out in Shares purchased on the open market in a number equal to the number of RSUs held. The fair value of the RSUs is accrued in accounts payable and charged to earnings upon grant. This estimated value is adjusted each period based on the period-end trading price of the Corporation's Shares with the resulting gains or losses included in earnings. Dividend equivalent grants, if any, are recorded as stock-based compensation expense in the period the dividend is paid.

FUTURE ACCOUNTING POLICY CHANGES

Information regarding our changes in accounting policies is included in Note 3 to the consolidated financial statements.

INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")

Effective January 1, 2011, Newalta adopted IFRS. Our first interim financial statements for 2011 have been prepared in accordance with IFRS and the comparative period in 2010 has been restated to reflect our transition date of January 1, 2010. IFRS uses a conceptual framework similar to previous GAAP, but there are differences in recognition, measurement and disclosures.

A summary of the key areas where changes in accounting policies have impacted our consolidated financial statements is presented below. This summary should not be regarded as a complete list of the changes that have resulted from the transition to IFRS. Rather, it is intended to highlight those areas management believes to be the most significant.

Most adjustments required on transition to IFRS have been made retrospectively against opening retained earnings as of the transition date.

The key areas that impact previously reported 2010 Net earnings are: decommissioning liability; capitalization of borrowing costs; stock-based compensation; and deferred tax. Information regarding the individual changes are included in Note 17 to the Unaudited Consolidated Financial Statements for the three months ended March 31, 2011. There are no changes to previously reported 2010 Adjusted EBITDA.

Decommissioning liability under IFRS increased by $33 million with a corresponding $20 million increase to the value of assets and a reduction of $13 million to retained earnings, as a result of the change in calculation methodologies. The effect on gross profit and net earnings was higher depreciation. Unwinding of the discount related to the decommissioning liability has been re-classified to finance charges where under previous GAAP, was included in amortization and accretion expense. The calculation change in decommissioning liability had no material impact on the unwinding of the discount related to the decommissioning liability.

Capitalization of borrowing costs is mandatory under IFRS for capital projects that meet the qualifying criteria. Under previous GAAP, this was optional and borrowing costs were not capitalized by Newalta. The capitalization of borrowing costs reduced finance charges, resulting in a positive impact to net earnings.

Stock-based compensation for the 2006 and 2008 option plans, and SARS, are calculated using a different model. IFRS values the outstanding incentives plans at fair value. Under previous GAAP, the company accounted for the plans by reference to their intrinsic value. The change in methodology under IFRS resulted in a negative impact to 2010 net earnings.

The majority of the change in deferred tax relates to the tax impact of the key areas discussed above.

Impact on 2010 Net Earnings

                                                                     Impact
                                                         Impact    Increase/
                                 Facilities    Onsite  Increase/  (Decrease)
                                  Impact Q1 Impact Q1 (Decrease)  Full Year
($000s)                                2010      2010    Q1 2010       2010
----------------------------------------------------------------------------
Decommissioning Liability - 
 Increased asset value drives 
 increased depreciation                (395)      (10)      (405)    (1,624)
Unwinding of the discount 
 related to the decommissioning 
 liability re-classified as 
 finance charges                        435        60        495      1,982
----------------------------------------------------------------------------
Impact to Gross Profit                   40        50         90        358
----------------------------------------------------------------------------
Unwinding of the discount related 
 to the decommissioning liability 
 re-classified as finance charges 
 and revaluation                                            (492)    (1,966)
Stock-based compensation                                    (508)    (1,536)
Capitalization of borrowing costs 
 for qualifying projects                                       8        819
Deferred tax                                                 129        384
----------------------------------------------------------------------------
Impact to Net Earnings                                      (773)    (1,941)
----------------------------------------------------------------------------

The key areas that impact the previously reported 2010 Balance Sheet are: decommissioning liability (as described above); tax basis of goodwill, including intangibles; and the treatment of the trust units upon conversion from a trust to a Corporation.

Under previous GAAP, deferred tax on intangibles and goodwill upon acquisition was effectively eliminated. This is not the case with IFRS. This impact created a deferred tax liability of $7.5 million.

Trust units issued prior to our conversion to a Corporation were classified as a financial liability rather than an equity instrument. As a result, the liability associated with the trust units was measured at fair value through net earnings up until December 31, 2008, the date of conversion from a Trust to a Corporation. This resulted in a $238 million increase to retained earnings and decrease to shareholders capital.

Please refer to Note 17 in the unaudited consolidated financial statements for the quarter ended March 31, 2011 for a reconciliation of the IFRS financial statements to previously released financial statements prepared under previous GAAP.

BUSINESS RISKS

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.

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 20 customers generate approximately 40% of our total revenue, with 20% of these customers having a credit rating of A or higher and 70% 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 March 31, 2011. In Q1 2011, our exposure to foreign exchange was mitigated by the rise in commodity prices, as well as our U.S. dollar denominated long-term debt, which served as a natural hedge, reducing 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 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 20 to the consolidated financial statements for the three and twelve months ended December 31, 2010.

In January 2010, we invested $4 million in shares and warrants in BioteQ Environmental Technologies Inc. The portion of the investment allocated to shares has been classified as available for sale and the portion of the investment allocated to warrants is a derivative accounted for much like held-for-trading investments. The investment is re-valued each quarter. The unrealized gain or loss on the shares is reflected on the Statements of Comprehensive Income and Accumulated Other Comprehensive Income, whereas the unrealized gain or loss for warrants is reflected on the Consolidated Statement of Operations under Finance charges.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

During the three months ended March 31, 2011, there have been no changes in the internal controls and procedures relating to disclosure and financial reporting 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 Canadian 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.

Condensed Consolidated Balance Sheets

(Unaudited - Expressed in thousands 
 of Canadian Dollars)
                                 March 31,      December 31,      January 1,
                                     2011              2010            2010
                                                   (Note 17)       (Note 17)
----------------------------------------------------------------------------
Assets
Current assets
 Cash and cash equivalents              -                 -           3,920
 Accounts receivable              113,585           102,378          84,317
 Inventories                       30,301            26,645          33,148
 Investment (Note 3)                3,622             4,274               -
 Prepaid expenses and other         7,187             7,292           6,183
----------------------------------------------------------------------------
                                  154,695           140,589         127,568
Non-current assets
 Note receivable                      853               890             978
 Property, plant and equipment    741,255           741,793         721,656
 Permits and other intangible 
  assets (Note 4)                  60,389            60,579          61,935
 Goodwill                         102,897           102,897         103,597
 Deferred tax asset                   777               929           1,688
----------------------------------------------------------------------------
TOTAL ASSETS                    1,060,866         1,047,677       1,017,422
----------------------------------------------------------------------------
Equity and liabilities
Current liabilities
 Bank indebtedness                  3,575               169               -
 Accounts payable and accrued 
  liabilities                     114,603           120,370          90,642
 Dividends payable                  3,153             3,152           2,423
----------------------------------------------------------------------------
                                  121,330           123,691          93,065
Non-current liabilities
 Senior secured debt (Note 5)      62,063            51,520         192,043
 Convertible debentures 
  - debt portion                  112,430           112,074         110,725
 Senior unsecured debentures 
  (Note 6)                        122,128           122,050               -
 Other liabilities (Note 10)        4,050             5,327           1,647
 Deferred tax liability            58,021            54,491          46,856
 Decommissioning liability 
  (Note 7)                         54,704            54,368          54,585
----------------------------------------------------------------------------
TOTAL LIABILITIES                 534,727           523,521         498,921
----------------------------------------------------------------------------
Shareholders' Equity
Shareholders' capital (Note 8)    316,155           315,934         315,836
Convertible debentures 
 - equity portion                   1,021             1,021           1,021
Contributed surplus                 1,679             1,679           1,679
Retained earnings                 207,015           204,935         199,965
Accumulated other comprehensive 
 income                               269               587               -
----------------------------------------------------------------------------
TOTAL EQUITY                      526,139           524,156         518,501
----------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES    1,060,866         1,047,677       1,017,422
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Condensed Consolidated Statements of Operations
Unaudited - Expressed in thousands of Canadian Dollars)

                                        For the Three Months Ended March 31,
                                                      2011             2010
                                                                   (Note 17)
----------------------------------------------------------------------------
Revenue                                            152,422          131,240
Cost of sales                                      113,204           98,451
----------------------------------------------------------------------------
Gross profit                                        39,218           32,789
----------------------------------------------------------------------------
 Selling, general and administrative                22,637           18,748
 Research and development                              583              193
----------------------------------------------------------------------------
                                                    23,220           18,941
----------------------------------------------------------------------------
Earnings before interest and tax                    15,998           13,848
Finance charges                                      7,027            6,737
----------------------------------------------------------------------------
Earnings before income taxes                         8,971            7,111
----------------------------------------------------------------------------
Provision for income taxes
 Current                                                26              128
 Deferred                                            3,712            2,034
----------------------------------------------------------------------------
                                                     3,738            2,162
----------------------------------------------------------------------------
Net earnings                                         5,233            4,949
----------------------------------------------------------------------------
Net earnings per Share (Note 11)                      0.11             0.10
Diluted earnings per Share (Note 11)                  0.11             0.10
----------------------------------------------------------------------------
Supplementary information:
Amortization included within cost of sales          11,131           10,393
Amortization included in selling, general 
 and administrative                                  2,813            2,622
----------------------------------------------------------------------------
Total amortization                                  13,944           13,015
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Condensed Consolidated Statements of Comprehensive Income and
Accumulated Other Comprehensive Income

(Unaudited - Expressed in thousands of Canadian Dollars)

                                        For the Three Months Ended March 31,
                                                      2011             2010
                                                                   (Note 17)
----------------------------------------------------------------------------
Net earnings                                         5,233            4,949
Other comprehensive income:
 Unrealized gain on investment in shares(1)           (318)             999
----------------------------------------------------------------------------
Other comprehensive income                            (318)             999
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Comprehensive income                                 4,915            5,948
----------------------------------------------------------------------------
Accumulated other comprehensive income, 
 beginning of period                                   587                -
Other comprehensive income                            (318)             999
----------------------------------------------------------------------------
Accumulated other comprehensive income, end of period  269              999
----------------------------------------------------------------------------
(1) Net of tax of $0.1 million.


Condensed Consolidated Statement of Changes in Equity
(Unaudited -- Expressed in thousands of Canadian Dollars)

                                                                Contributed 
                                                    Convertible     surplus 
                                                     Debentures      (share-
                                      Shareholders'      equity       based
                                           capital      portion)   payments)
----------------------------------------------------------------------------
Balance, January 1, 2010                   315,836        1,021       1,679
----------------------------------------------------------------------------
Changes in equity for three 
 months ended March 31, 2010
Dividends declared                               -            -           -
Unrealized gain on investment in shares          -            -           -
Net earnings for the period                      -            -           -
----------------------------------------------------------------------------
Balance, March 31, 2010                    315,836        1,021       1,679
----------------------------------------------------------------------------
Changes in equity for nine months 
 ended December 31, 2010
Exercise of options                             98            -           -
Dividends declared                               -            -           -
Unrealized loss on investment in shares          -            -           -
Net earnings for the period                      -            -           -
----------------------------------------------------------------------------
Balance, December 31, 2010                 315,934        1,021       1,679
----------------------------------------------------------------------------
Changes in equity for three months 
 ended March 31, 2011
Exercise of options                            221            -           -
Dividends declared                               -            -           -
Unrealized loss on investment in shares          -            -           -
Net earnings for the period                      -            -           -
----------------------------------------------------------------------------
Balance, March 31, 2011                    316,155        1,021       1,679
----------------------------------------------------------------------------

                                                           Other  
                                          Retained comprehensive
                                          earnings        income      Total
----------------------------------------------------------------------------
Balance, January 1, 2010                   199,965             -    518,501
----------------------------------------------------------------------------
Changes in equity for three months 
 ended March 31, 2010
Dividends paid                              (2,424)            -     (2,424)
Unrealized gain on investment in shares          -           999        999
Net earnings for the period                  4,949             -      4,949
----------------------------------------------------------------------------
Balance, March 31, 2010                    202,490           999    522,025
----------------------------------------------------------------------------
Changes in equity for nine months 
 ended December 31, 2010
Exercise of options                              -             -         98
Dividends paid                              (8,728)            -     (8,728)
Unrealized loss on investment in shares          -          (412)      (412)
Net earnings for the period                 11,173             -     11,173
----------------------------------------------------------------------------
Balance, December 31, 2010                 204,935           587    524,156
----------------------------------------------------------------------------
Changes in equity for three months 
 ended March 31, 2011
Exercise of options                              -             -        221
Dividends paid                              (3,153)            -     (3,153)
Unrealized loss on investment in shares          -          (318)      (318)
Net earnings for the period                  5,233             -      5,233
----------------------------------------------------------------------------
Balance, March 31, 2011                    207,015           269    526,139
----------------------------------------------------------------------------


Condensed Consolidated Statements of Cash Flows
(Unaudited - Expressed in thousands of Canadian Dollars)

                                        For the Three Months Ended March 31,
                                                      2011             2010 
                                                                   (note 17)
----------------------------------------------------------------------------
Cash provided by (used for):
Operating Activities
Net earnings                                       $ 5,233          $ 4,949
Adjustments for:
 Amortization                                       13,944           13,015
 Income taxes provision                              3,738            2,162
 Income taxes paid                                     (48)             (92)
 Stock based compensation expense                    4,211            1,923
 Finance charges expense                             7,027            6,737
 Finance charges paid                               (1,117)          (3,339)
 Other                                                 (33)             (26)
----------------------------------------------------------------------------
                                                    32,955           25,329
Increase in non-cash working capital (Note 15)     (25,780)         (14,312)
Decommissioning costs incurred                        (198)            (277)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                     6,977           10,740
----------------------------------------------------------------------------
Investing Activities
 Additions to property, plant and equipment 
  (Note 15)                                        (17,709)         (10,021)
 Proceeds on sale of property, plant and equipment     103               55
 Purchase of investment                                  -           (4,000)
----------------------------------------------------------------------------
                                                   (17,606)         (13,966)
----------------------------------------------------------------------------
Financing Activities
 Issuance of shares                                     19                -
 Increase (decrease) in senior secured debt         10,319           (4,965)
 Decrease in note receivable                            37               12
 Dividends paid                                     (3,152)          (2,424)
----------------------------------------------------------------------------
                                                     7,223           (7,377)
----------------------------------------------------------------------------
Decrease in cash and cash equivalents               (3,406)         (10,603)
Cash and cash equivalents (bank indebtedness), 
 beginning of period                                  (169)           3,920
----------------------------------------------------------------------------
Bank indebtedness, end of period                    (3,575)          (6,683)
----------------------------------------------------------------------------

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended March 31, 2011 and 2010

(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 85 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 the oil and gas, petrochemical, refining, lead, manufacturing and mining industries.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

(i) Statement of Compliance

These unaudited condensed consolidated interim financial statements have been prepared in accordance with the requirements of International Accounting Standard (IAS) 34, Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and include the accounts of Newalta and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These unaudited condensed interim financial statements are prepared using International Financial Reporting Standards (IFRS) accounting policies which became Canadian generally accepted accounting principles for publicly accountable enterprises and were adopted by the Corporation for fiscal years beginning on January 1, 2011. These are the Corporation's first IFRS financial statements issued after the date of transition; accordingly IFRS 1 (First-time Adoption of International Financial Reporting Standards) has been applied. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Corporation as at and for the year ended December 31, 2010.

An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Corporation for comparative periods and as at January 1, 2010, the date of transition, is provided in note 17.

These condensed consolidated interim financial statements were approved by the Audit Committee on behalf of the Board of Directors on May 9, 2011.

(ii) Basis of Preparation

a) Cash and cash equivalents

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

b) Inventory

Inventory is comprised of oil, lead and other recycled products, spare parts and supplies, and is 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 inventory comprises the laid down cost.

c) Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated amortization. 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 (net of estimated residual value) by the estimated future hours of service. Residual values, up to 20% of original cost, may be established for buildings, site improvements, and tanks. These residual values are not depreciated.

Landfill assets represent the costs of landfill available space, including original acquisition cost, incurred landfill construction and development costs, including gas 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, is amortized on a per-unit basis as landfill space is consumed. Management annually updates landfill capacity estimates, based on survey information provided by independent engineers, and projected landfill construction and development costs. The impact on annual amortization expense of changes in estimated capacity and construction costs is accounted for prospectively.

d) Permits and other intangible assets

Permits and other intangible assets are stated at cost, less accumulated amortization, and consist of certain production processes, trademarks, permits and agreements which are amortized over the period of the contractual benefit of 8 to 20 years, straight line. 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.

e) Goodwill

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

f) Impairment

Impairments are recorded when the recoverable amount of assets are less than their carrying amounts. The recoverable amount is the higher of an asset's fair value less cost to sell or its value in use. Impairment losses, other than those relating to goodwill, are evaluated for potential reversals when events or changes in circumstances warrant such consideration.

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. Additionally, the carrying values of identifiable intangible assets with indefinite lives and goodwill are tested annually for impairment.

For the purpose of impairment testing, goodwill is allocated to cash-generating units ("CGU") and management has determined that the appropriate CGUs cash generating units ("CGUs") for Newalta are: our Western Facilities business unit, Eastern Facilities business unit, VSC business unit, and Onsite division. Goodwill is allocated to those CGUs that are expected to benefit from the business combination in which the goodwill arose.

When the net book value of a CGU is higher than its value in use, the difference is an impairment loss. An impairment loss is first written off against any goodwill associated with the CGU with any remaining impairment loss proportionally allocated to the assets of that CGU. Management determined that as at January 1, 2010, December 31, 2010 and March 31, 2011 there was no impairment.

g) 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 (20 to 300 years). Over this period, Newalta recognizes the liability for the future decommissioning liabilities associated with property, plant and equipment. These obligations are initially measured at fair value, which is the discounted future value of the liability. This fair value is capitalized as part of the cost of the related asset and depreciated 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 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. Actual decommissioning costs are charged against the provision as incurred.

h) Revenue recognition

Revenue is recognized in the period products are delivered or services provided and when collection is reasonably assured.

The major sources of revenue relate to the processing of waste material and the sale of recycled products recovered from the waste. Revenue is recognized when waste material is received and a liability is assumed for the waste. Revenue on recycled products is recognized when products are delivered to customers or pipelines. For construction projects, revenue is recognized on a percentage of completion basis. For onsite projects, revenue is recognized on a per-day fee, throughput or on a percentage of completion basis.

i) 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 have been deferred is modified or cancelled, the Company will assess the recoverability of the deferred costs and if considered unrecoverable, will expense the costs in the period the assessment is made.

j) Deferred taxes

Newalta and its wholly owned subsidiaries follow the liability method of accounting for income taxes. Deferred income tax assets and liabilities are measured based upon temporary differences between the carrying values of assets and liabilities and their tax basis. 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 more likely than not 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.

k) 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 and the "if converted" method for the convertible debentures.

l) Share-based incentive plans

The Corporation's share-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 three share-based option compensation plans, the 2003 Option Plan (the "2003 Plan"), the 2006 Option Plan (the "2006 Plan") and the 2008 Option Plan (the "2008 Plan"). Under the option plans, 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").

The 2003 Plan is an equity-settled plan where the fair value of options 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, 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.

The 2006 Plan and the 2008 Plan allow for individuals to settle their options in cash. Accordingly, 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. 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 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 Shares on the TSX. SARs generally expire five years after they have been 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 share-based compensation expense recognized over the vesting period of the options. 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 ("DSUs") plan for which 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 with a corresponding increase in liabilities over the vesting period of the units. 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 vest immediately and 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 ("PSUs") incentive plan has been established for officers and other eligible employees. Under this plan, notional PSUs are granted upon commencement in the plan and vest at the end of a three-year term. The vested PSUs are automatically paid out in cash upon vesting at a value determined by the fair market value of Shares at December 31 of the vesting year and based on the number of PSUs held 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 PSUs. The fair value of the PSUs is accrued in accounts payable and charged to earnings on a straight-line basis over the three-year term. This estimated value is adjusted each period based on the period-end trading price of the Corporation's 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.

A cash-settled Restricted Share Unit ("RSUs") incentive plan has been established for officers and other eligible employees. Under this plan, notional RSUs are granted upon commencement in the plan and vest annually over a two-year term or immediately upon termination of employment by a participant. Upon vesting, RSUs are automatically paid out in Shares purchased on the open market in a number equal to the number of RSUs held. The fair value of the RSUs is accrued in accounts payable and charged to earnings upon grant. This estimated value is adjusted each period based on the period-end trading price of the Corporation's Shares with the resulting gains or losses included in earnings. Dividend equivalent grants, if any, are recorded as stock-based compensation expense in the period the dividend is paid.

m) Financial instruments

Classification

All financial instruments are classified into one of five 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 are
 through profit and loss        recognized in net earnings
 ("FVTPL")
Held-to-maturity investments   Amortized cost, using the effective interest
                                method
Loans and receivables          Amortized cost, using the effective interest
                                method
Available-for-sale financial   Fair value and changes in fair value are
 assets                         recorded in other comprehensive income
                                until the instrument is derecognized or
                                impaired
Financial liabilities          Amortized cost, using the effective interest
                                method
----------------------------------------------------------------------------

Cash and cash equivalents, accounts receivable and note receivable are classified as loans and receivables. The portion of the investment allocated to shares has been classified as available for sale and the portion of the investment allocated to warrants is a derivative accounted for much like financial assets at FVTPL. Senior secured debt, senior unsecured debentures, convertible debentures, bank indebtedness, accounts payable and accrued liabilities and dividends payable are classified as other financial liabilities.

Convertible Debentures

Newalta presents outstanding Convertible Debentures in their debt and equity component parts on the consolidated balance sheets. The debt component represents the total discounted present value of the semi-annual interest obligations to be satisfied by cash and the principal payment due at maturity, using the rate of interest that would have been applicable to a non-convertible debt instrument of comparable term and risk at the date of issue. Typically, this results in an accounting value assigned to the debt component of the Convertible Debentures which is less than the principal amount due at maturity. The debt component presented on the consolidated balance sheets accretes over the term of the relevant debenture to the face value of the outstanding debentures at maturity. The difference is reflected in finance charges, reflecting the effective yield of the debt component of the Convertible Debentures. The equity component of the Convertible Debentures is presented under Shareholders' Equity on the consolidated balance sheets, and represents the value ascribed to the conversion right granted to the holder offset by the related deferred tax liability. The equity component remains fixed over the term of the related Debentures. If a holder chooses to convert their Convertible Debentures into Shares, a proportionate amount of both the debt and equity components are transferred to Shareholders' Capital. Accretion and interest expense for the Convertible Debentures are reflected as finance charges on the consolidated statements of operations.

Transaction Costs

Transaction costs associated with other financial liabilities are netted against the related liability.

n) Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand.

o) Measurement uncertainty

The preparation of Newalta's financial statements in a timely manner and in accordance with International Financial Reporting Standards requires the use of estimates, assumptions and judgment regarding assets, liabilities, revenue and expenses. 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 liabilities, deferred income taxes, the equity component of convertible debentures, 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.

p) Accounting standards issued but not yet effective

The IASB has issued IFRS 9 - Financial Instruments (Classification and Measurement), which is mandatory for accounting periods beginning January 1, 2013. The Company is assessing the impact of IFRS 9 on its results of operations and financial position.

NOTE 3. INVESTMENT

During the first quarter of 2010, Newalta acquired 3,643,464 units, at a price of $1.10 per share from the treasury of BioteQ Environmental Technologies Inc. ("BioteQ") for cash consideration of $4 million. Each unit purchased includes a common share and a warrant to acquire an additional common share of BioteQ at $1.375 during the first year, and $1.65 thereafter. The warrants expire after 5 years. The fair value of the warrants is estimated using a binomial methodology and the common shares based on publicly available quoted prices.

The common shares are classified as available for sale. The common shares are marked to market at each period end with changes in fair value recorded in other comprehensive income. As at March 31, 2011, a cumulative unrealized gain of $0.3 million (net of tax $0.1 million) was recorded in accumulated comprehensive income.

The warrants are classified as FVTPL and are revalued at each period end with the change in fair value recognized in earnings. For the three months ended March 31, 2011, the Company recorded an unrealized loss of $0.3 million which is included in finance charges. As at March 31, 2011, the fair value was calculated using the following assumptions: an expected volatility of 81%, a risk-free interest rate of 2.2% and no expected dividend.

NOTE 4. PERMITS AND OTHER INTANGIBLE ASSETS

----------------------------------------------------------------------------
                                               Expiring        Non-
                                   Indefinite  permits/ competition
                                      permits    rights   contracts   Total
----------------------------------------------------------------------------

Cost
Balance, January 1, 2010               53,012    14,650       6,020  73,682
Additions during the quarter ended
 March 31, 2010                            25         -           -       -
----------------------------------------------------------------------------
Balance, December 31, 2010 and
 March 31, 2011                        53,037    14,650       6,020  73,707
----------------------------------------------------------------------------

Amortization and impairment losses(1)
Balance, January 1, 2010                    -     6,338       5,409  11,747
Amortization for the year                   -       770         611   1,381
----------------------------------------------------------------------------
Balance, December 31, 2010                  -     7,108       6,020  13,128
----------------------------------------------------------------------------
Amortization for the quarter                -       190           -     190
----------------------------------------------------------------------------
Balance, March 31, 2011                     -     7,298       6,020  13,318
----------------------------------------------------------------------------

Carrying amounts
As at January 1, 2010                  53,012     8,312         611  61,935
As at December 31, 2010                53,037     7,542           -  60,579
As at March 31, 2011                   53,037     7,352           -  60,389
----------------------------------------------------------------------------
(1) Amortization is included in within cost of sales and selling, general
    and administrative expenses in the Consolidated Statements of
    Operations.


NOTE 5. SENIOR SECURED DEBT
                                     March 31,   December 31,     January 1,
                                         2011           2010           2010
----------------------------------------------------------------------------
Commitments under credit facility      64,154         53,859        195,200
Issue costs                            (2,091)        (2,339)        (3,157)
----------------------------------------------------------------------------
Senior secured debt                    62,063         51,520        192,043
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 December 17, 2013. The facility also requires Newalta to be in compliance with certain covenants. At March 31, 2011, Newalta was in compliance with all covenants. There are no impacts on these covenants as a result of our transition to IFRS

NOTE 6. SENIOR UNSECURED DEBENTURES

The trust indenture under which the Senior Unsecured Debentures have been issued requires Newalta to be in compliance with certain covenants on an annual basis. At March 31, 2011, Newalta was in compliance with all covenants. There are no impacts on these covenants as a result of our transition to IFRS.

                                     March 31,   December 31,     January 1,
                                         2011           2010           2010
----------------------------------------------------------------------------
Senior unsecured debentures - gross   125,000        125,000              -
Issue costs                           (2,872)        (2,950)              -
----------------------------------------------------------------------------
Senior secured debt                   122,128        122,050              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 7. RECONCILIATION OF DECOMMISSIONING LIABILITY

The total 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, $54.7 million ($54.6 million at January 1, 2010 and $54.4 million at December 31, 2010) has been accrued on the consolidated balance sheet at March 31, 2011. The total estimated future cost for decommissioning liability at March 31, 2011 was $9.8 billion. The majority of the undiscounted future decommissioning liabilities relate to the Stoney Creek landfill in Ontario, which are expected to be incurred over the next 300 years. Excluding the landfill, the total undiscounted future cost is $ 36.1 million. Newalta uses a discount rate of 4% and an inflation rate of 2% to calculate the present value of the decommissioning liability. The reconciliation of estimated and actual expenditures for the period is provided below:

----------------------------------------------------------------------------
Decommissioning liability as at January 1, 2010                      54,585
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Expenditures incurred to fulfill obligations                         (2,184)
Unwinding of discount                                                 1,967
----------------------------------------------------------------------------
Decommissioning liability as at December 31, 2010                    54,368
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Expenditures incurred to fulfill obligations                           (198)
Unwinding of discount                                                   534
----------------------------------------------------------------------------
Decommissioning liability as at March 31, 2011                       54,704
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 8. SHAREHOLDERS' CAPITAL

Authorized capital of Newalta Corporation consists of an unlimited number of 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 period:

                                                   Shares (#)     Amount ($)
----------------------------------------------------------------------------
Shares outstanding as at January 1, 2010              48,476        315,836
----------------------------------------------------------------------------
Shares issued on exercise of options                      16             98
----------------------------------------------------------------------------
Shares outstanding as at December 31, 2010            48,492        315,934
----------------------------------------------------------------------------
Shares issued on exercise of options                      17            221
----------------------------------------------------------------------------
Shares outstanding as at March 31, 2011               48,509        316,155
----------------------------------------------------------------------------


NOTE 9. CAPITAL DISCLOSURES

Newalta's capital structure consists of:
----------------------------------------------------------------------------
                                     March 31,   December 31,     January 1,
                                         2011           2010           2010
----------------------------------------------------------------------------
Senior secured debt (1)                64,154         53,859        195,200
Letters of Credit issued as
 financial security to third parties
 (Note 13)                             21,477         21,477         22,137
Convertible debentures, debt
 portion                              112,430        112,074        110,725
Senior unsecured debentures(1)        125,000        125,000              -
Shareholders' equity                  526,139        524,156        518,501
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      849,200        836,566        846,563
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Gross of transaction costs

The objectives in managing the capital structure are to:

- Utilize an appropriate amount of leverage to maximize return on Shareholders' equity; and

- To 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;

- 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. There are no impacts on our covenants under our Credit Facility or related to our trust indenture as a result of our transition to IFRS.

Covenants under our Credit Facility include:
----------------------------------------------------------------------------
                                     March 31,  December 31,
Ratio                                    2011          2010       Threshold
----------------------------------------------------------------------------
Senior Secured Debt(2) to EBITDA(3)    0.69:1        0.63:1  2.75:1 maximum
Total Debt(4) to EBITDA(3)             1.69:1        1.68:1  3.50:1 maximum
Interest Coverage                      5.20:1        4.97:1  2.25:1 minimum
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) We are restricted from declaring dividends if we are in breach of the
    covenants under our Credit Facility. 
(2) Senior Secured Debt means the Total Debt less the Senior Unsecured
    Debentures.
(3) EBITDA is a non-GAAP 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
    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
    and the Senior Unsecured Debentures, but excludes the existing $115
    million Convertible Debentures.

The trust indenture under which the Senior Unsecured Debentures have been issued also contains certain 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:
----------------------------------------------------------------------------
                              March 31,  December 31,
Ratio                             2011          2010              Threshold
----------------------------------------------------------------------------
Senior Secured Debt including
 Letters of Credit              83,540        75,336       $245,000 maximum
Cumulative capital lease
 obligations                       nil           nil        $25,000 maximum
Consolidated Fixed Charge
 Coverage                       5.20:1        4.97:1         2.00:1 minimum
Period end surplus for 
 restricted payments            19,019        17,284  Not to exceed surplus
----------------------------------------------------------------------------

NOTE 10. INCENTIVE PLANS

a) Option Plans

A summary of the status of Newalta's option plans as of January 1, 2010, December 31, 2010 and March 31, 2011 and changes during the periods ended on those dates is presented as follows:

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                           Weighted            Weighted            Weighted
                            Average             Average             Average
                     2008  Exercise      2006  Exercise      2003  Exercise
                  Options     Price   Options     Price   Options     Price
                    (000s) ($/Share)    (000s) ($/Share)    (000s) ($/Share)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At January 1, 2010    887      5.34       718     16.95       365     21.00
----------------------------------------------------------------------------
Granted               843      8.07         -         -         -         -
Exercised             (18)     5.31         -         -         -         -
Forfeited               -         -         -         -         -         -
Cancelled             (45)     7.15       (10)    14.00       (12)    10.52
----------------------------------------------------------------------------
At December 31,
 2010               1,667      6.67       708     16.99       353     21.37
----------------------------------------------------------------------------
Granted (1)           803     11.93         -         -         -         -
Exercised             (21)     5.31         -         -         -         -
Forfeited               -         -         -         -         -         -
Cancelled               -         -         -         -         -         -
----------------------------------------------------------------------------
At March 31, 2011   2,449      8.41       708     16.99       353     21.37
----------------------------------------------------------------------------
Exercisable at Mar.
 31, 2011             665      6.44       504     17.18       353     21.37
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) The options were granted at the market price of $11.93 per Share. Each
    tranche of the options vest over a three year period (with a five year
    life). The fair value was calculated using the Black-Scholes method of
    valuation, assuming 50.27% volatility, a weighted average expected
    dividend yield of 2.37% annually, a risk free rate of 1.94% and a 3%
    forfeiture rate


b) Share Appreciation Rights

Changes in the number of outstanding SARs were as follows:

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                   Weighted
                                                                    Average
                                                        SARs Exercise Price
                                                       (000s)      ($/right)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At January 1, 2010                                       876           6.99
----------------------------------------------------------------------------
Granted                                                  610           8.20
Exercised                                                (36)          5.31
Forfeited                                                  -              -
Cancelled                                                (23)          8.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At December 31, 2010                                   1,427           7.53
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Granted (1)                                              560          11.93
Exercised                                               (105)          5.95
Forfeited                                                  -              -
Cancelled                                                  -              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At March 31, 2011                                      1,882           8.93
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable at March 31, 2011                            501           8.74
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The fair value was calculated using the Black-Scholes method of
    valuation, assuming a 5 year expected life, 50.27% volatility, a
    weighted average expected dividend yield of 2.37% annually, a risk free
    rate of 1.94% and a 5% forfeiture rate.

c) Share Unit Plans

Changes in the number of outstanding share units under our DSU, PSU and RSU
plans were as follows:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                      Units
(000s)                                                                (000s)
----------------------------------------------------------------------------
At January 1, 2010                                                        -
----------------------------------------------------------------------------
Granted                                                                  16
----------------------------------------------------------------------------
At December 31, 2010                                                     16
----------------------------------------------------------------------------
Granted                                                                 126
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At March 31, 2011                                                       142
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable at March 31, 2011                                             -
----------------------------------------------------------------------------

d) Stock-based Compensation Expense

The following table summarizes the stock-based compensation expense recorded for all plans within selling, general and administrative expense on the Consolidated Statements of Operations:

                                                Three Months Ended March 31,
(000s)                                                  2011           2010
----------------------------------------------------------------------------
Stock option plans                                     2,475          1,180
SARs and share unit plans                              2,466            824
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total stock-based compensation expense                 4,941          2,004
----------------------------------------------------------------------------

e) Other liabilities

Other liabilities consist of non-current obligations under the Corporation's incentive plans.

NOTE 11. EARNINGS PER SHARE

Basic earnings per Share calculations for the three months ended March 31, 2011 and 2010 were based on the weighted average number of Shares outstanding for the periods. Diluted earnings per Share include the potential dilution of outstanding options under incentive plans to acquire Shares and from the conversion of the convertible debentures.

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 number of excluded options for the three months ended March 31, 2011 was 1,060,200 (1,072,700 in 2010).

The diluted earnings per Share calculation does not include the impact of anti-dilutive convertible debentures. These debentures would not be converted to Shares during the period because the current period interest (net of tax) per Share obtainable on conversion exceeds basic earnings per Share. The number of Shares issuable on conversion of these debentures excluded for the three months ended March 31, 2011 was 5,000,000 (5,000,000 for the same period in 2010).

                                                         Three Months Ended
                                                                   March 31,
----------------------------------------------------------------------------
                                                        2011           2010
----------------------------------------------------------------------------
Weighted average number of Shares                     48,495         48,480
Net additional Shares if options exercised               454            346
Net additional Shares if debentures converted              -              -
----------------------------------------------------------------------------
Diluted weighted average number of Shares             48,949         48,826
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 12. DIVIDENDS DECLARED AND PAID

During the quarter, Newalta declared a dividend of $0.065 per Share to holders of Shares of record on March 31, 2011. This dividend was paid on April 15, 2011.

NOTE 13. COMMITMENTS

As at March 31, 2011, Newalta had issued letters of credit and surety bonds in respect of compliance with environmental licenses in the amount of $21.5 million and $31.5 million, respectively ($21.5 million and $31.5 million as at December 31, 2010 and $22.1 million and $20.2 million as at January 1, 2010).

NOTE 14. FINANCIAL INSTRUMENTS

a) Fair Value of Financial Assets and Liabilities

Newalta's financial instruments include cash and cash equivalents, bank indebtedness, accounts receivable, note receivable, accounts payable and accrued liabilities, dividends payable, senior long-term 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 accounts receivable, accounts payable and accrued liabilities and for 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 values of Newalta's financial instruments at March 31, 2011 are as follows:

----------------------------------------------------------------------------
                          Loans and  Available       Other   Total Carrying
                 FVTPL  Receivables   for sale Liabilities            Value
----------------------------------------------------------------------------
Accounts
 receivable          -      113,585          -           -          113,585
Note receivable      -          853          -           -              853
Bank
 indebtedness        -            -          -       3,575            3,575
Accounts payable
 and accrued
 liabilities         -            -          -     114,603          114,603
Dividends payable    -            -          -       3,153            3,153
Senior secured
 debt(1)             -            -          -      62,063           62,063
----------------------------------------------------------------------------
(1) Net of related costs.


The fair value of the Debentures is based on the closing trading price on
the Toronto Stock Exchange as follows:

----------------------------------------------------------------------------
                                                             March 31, 2011
                                                                Quoted fair
                                            Carrying value(1)         value
----------------------------------------------------------------------------
7% Convertible debentures due November 30,
 2012                                                113,451        118,738
----------------------------------------------------------------------------
(1) Includes both the debt and equity portions.


The fair value of the Unsecured Senior Debentures is based on broker quote
as follows:

----------------------------------------------------------------------------
                                                             March 31, 2011
                                                                Quoted Fair
                                              Carrying Value          Value
----------------------------------------------------------------------------
7.625% Senior unsecured debentures due
 November 23, 2017                                   125,000        132,188
----------------------------------------------------------------------------

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. Instruments valued using Level 1 inputs include our Convertible Debentures and investment in BioteQ shares.

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 our Unsecured Senior Debentures and investment in warrants of BioteQ.

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 March 31, 2011, December 31, 2010 and January 1, 2010, Newalta did not have any Level 3 assets or liabilities.

b) Financial Instrument Risk Management

Credit risk and economic dependence

Newalta is subject to credit risk on its trade accounts receivable balances. The customer base is large and diverse, and no single customer balance exceeds 16% of total accounts receivable. 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.

Revenue from Newalta's largest customer represented 15% of revenue for the three months ended March 31, 2011 (14% for the three months ended March 31, 2010). This revenue is recognized within our Facilities segment.

Based on the nature of its 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 120 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 totalling $1.4 million, which are considered to be outstanding beyond normal repayment terms at March 31, 2011. A provision of $0.2 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.

----------------------------------------------------------------------------
             Trade Receivables         Allowance for       
          aged by invoice date      doubtful accounts     Net Receivables 
         Mar 31, Dec 31, Jan 1, Mar 31, Dec 31, Jan 1, Mar 31 Dec 31, Jan 1,
Aging      2011    2010   2010    2011    2010   2010    2011   2010   2010
----------------------------------------------------------------------------
Current  72,079  60,867 53,981       9      22     13  72,070 60,845 53,968
31-60
 days    13,414  11,730 15,454       -       1     21  13,414 11,729 15,433
61-90
 days     3,449   3,001  3,159      15      20     65   3,434  2,981  3,094
91 days+  1,513   2,220    791     138     298    725   1,375  1,922     66
----------------------------------------------------------------------------
Total    90,455  77,818 73,385     162     341    824  90,293 77,477 72,561
----------------------------------------------------------------------------

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 three months ended March 31, 2011 are as follows:

Allowance for doubtful accounts                              March 31, 2011
----------------------------------------------------------------------------
Balance, beginning of period                                            341
Change in amounts provided for                                         (115)
Net amounts written off as uncollectible                                (64)
----------------------------------------------------------------------------
Balance, end of period                                                  162
----------------------------------------------------------------------------

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.

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 Convertible Debentures and 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. The table below provides an interest rate sensitivity analysis for the three months ended March 31, 2011:

                                                               Net earnings
----------------------------------------------------------------------------
If interest rates increased by 1% with all other variables
 held constant                                                          130
----------------------------------------------------------------------------

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 March 31, 2011, Newalta had $32.4 million in working capital and $30.1 million in long-term debt denominated in U.S. dollars. Management has not entered into any financial derivatives to manage the risk for the foreign currency exposure as at March 31, 2011.

The table below provides a foreign currency sensitivity analysis on long-term debt and working capital outstanding as at March 31, 2011:

                                                               Net earnings
----------------------------------------------------------------------------
If the value of the U.S. dollar increased by $0.01 with all
 other variables held constant                                           23
----------------------------------------------------------------------------


NOTE 15. CASH FLOW STATEMENT INFORMATION

The following tables provide supplemental information.

                                                Three Months Ended March 31,
                                                        2011           2010
----------------------------------------------------------------------------
(Increase)/decrease in accounts receivable           (11,207)        (2,256)
(Increase)/decrease in inventories                    (3,656)           655
(Increase)/decrease in prepayments                       121            340
Increase/(decrease) in accounts payable and accrued
 liabilities                                         (15,428)       (14,514)
Increase/(decrease) in accounts payable related to
 purchases of property, plant and equipment            4,390          1,463
----------------------------------------------------------------------------
Total increase (decrease) in non-cash working
 capital                                             (25,780)       (14,312)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                Three Months Ended March 31,
                                                        2011           2010
----------------------------------------------------------------------------
Additions to property, plant and equipment during
 the year                                            (13,319)        (8,557)
Changes in property, plant and equipment accruals     (4,390)        (1,464)
----------------------------------------------------------------------------
Total cash additions to property, plant and
 equipment                                           (17,709)       (10,021)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

NOTE 16. SEGMENTED INFORMATION

Onsite and Facilities constitute our two reportable segments. 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 Facilities segment includes the processing of industrial and oilfield-generated wastes including collection, treatment, and disposal; clean oil terminalling; custom treating; the sale of recovered crude oil for our account; oil recycling; and lead battery recycling. The Onsite segment involves the mobilization of equipment and staff to process waste at our customer sites, including the processing of oilfield-generated wastes, the sale of recovered crude oil; industrial cleaning; site remediation; dredging and dewatering; and drill site processing including solids control and drill cuttings management.

                                  For the Three Months Ended March 31, 2011
                                          Inter-               Consolidated
                      Facilities  Onsite segment Unallocated(3)       Total
----------------------------------------------------------------------------
External revenue         107,406  45,016       -             -      152,422
Cost of sales (1)         78,991  34,213       -             -      113,204
----------------------------------------------------------------------------
Gross profit              28,415  10,803       -             -       39,218
Selling, general and
 administrative                -       -       -        22,637       22,637
Research and development       -       -       -           583          583
Finance charges                -       -       -         7,027        7,027
----------------------------------------------------------------------------
Earnings before taxes     28,415  10,803       -       (30,247)       8,971
----------------------------------------------------------------------------
Property, plant and
 equipment expenditures    5,821   4,976       -         2,486       13,283
----------------------------------------------------------------------------
Goodwill                  44,381  58,516       -             -      102,897
----------------------------------------------------------------------------
Total assets             677,753 308,068       -        75,045    1,060,866
----------------------------------------------------------------------------
Total liabilities        199,123 138,162       -       197,441      534,726
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                  For the Three Months Ended March 31, 2010
                                          Inter-               Consolidated
                      Facilities  Onsite segment Unallocated(3)       Total
----------------------------------------------------------------------------
External revenue          91,592  39,648       -             -      131,240
Inter segment revenue(2)     157       -    (157)            -            -
Cost of sales (1)         65,963  32,645    (157)            -       98,451
----------------------------------------------------------------------------
Gross profit              25,786   7,003       -             -       32,789
Selling, general and
 administrative                -       -       -        18,748       18,748
Research and development       -       -       -           193          193
Finance charges                -       -       -         6,737        6,737
----------------------------------------------------------------------------
Earnings before taxes     25,786   7,003       -       (25,678)       7,111
----------------------------------------------------------------------------
Property, plant and
 equipment expenditures    2,153   3,575       -         2,902        8,630
----------------------------------------------------------------------------
Goodwill                  44,381  59,216       -             -      103,597
----------------------------------------------------------------------------
Total assets             641,436 275,627       -        98,264    1,015,327
----------------------------------------------------------------------------
Total liabilities        213,603 195,269       -        84,430      493,302
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Cost of sales includes amortization of $11,131 (Facilities $7,737 and
    Onsite $3,394) and $10,393 for 2010 (Facilities $7,077 and Onsite
    $3,316).
(2) Inter-segment revenue is recorded at market, less the costs of serving
    external customers.
(3) Management does not allocate selling, general and administrative, taxes,
    and interest costs in the segment analysis.

NOTE 17. EXPLANATION OF TRANSITION TO IFRS

As stated in Note 1(i), these are the Corporation's first consolidated condensed financial statements prepared in accordance with IFRS.

As at January 1, 2010, the date of transition, the Corporation has elected the following exemptions permitted by IFRS 1 First time adoption of IFRS:

(1) Business combinations: Newalta elected not to restate any business combination before the transition date.

(2) Share-based payments: Newalta elected not to restate share-based payments relating to equity instruments that vested before the transition date and liabilities that were settled before the transition date.

(3) Arrangements containing a lease: Newalta elected to not retrospectively apply requirements relating to arrangements containing a lease. Newalta has only reviewed arrangements that were in existence at the date of transition.

(4) Newalta has elected under IFRS 1 to not retrospectively apply changes in existing decommissioning, restoration and similar liabilities. At the date of transition Newalta restated the provision in accordance with the requirement of the IFRS 1 exemption.

(5) Capitalization of the borrowing costs: Newalta elected not to capitalize borrowing costs before the transition date.

The accounting policies set out in Note 1 have been applied in preparing the financial statements for the three months ended March 31, 2011, the comparative information presented in these financial statements for the three months ended March 31, 2010 and in the preparation of an opening IFRS statement of financial position as at January 1, 2010 (the Corporation's date of transition).

In preparing its opening IFRS statement of financial position, the Corporation has adjusted amounts reported previously in financial statements prepared in accordance with previous Canadian GAAP. An explanation of how the transition from previous Canadian GAAP to IFRS has affected the Corporation's financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.

Reconciliation of the Condensed Consolidated Balance Sheets

As at January 1, 2010

(Unaudited - Expressed in thousands of Canadian Dollars)
                                                        Effect of
                                              Previous transition
                                              Canadian         to
                                         Note     GAAP       IFRS      IFRS
----------------------------------------------------------------------------
Assets
Current Assets
 Cash and cash equivalents                  a        -      3,920     3,920
 Accounts receivable                            84,317          -    84,317
 Inventories                                    33,148          -    33,148
 Investment                                                     -         -
 Prepaid expenses and other                      6,183          -     6,183
----------------------------------------------------------------------------
                                               123,648      3,920   127,568
Non-current assets
 Note receivable                                   978          -       978
 Property, plant and equipment              b  701,884     19,772   721,656
 Permits and other intangibles                  61,935          -    61,935
 Goodwill                                      103,597          -   103,597
 Deferred tax asset                              1,688          -     1,688
----------------------------------------------------------------------------
TOTAL ASSETS                                   993,730     23,692 1,017,422
----------------------------------------------------------------------------

Liabilities
Current liabilities
 Bank indebtedness                                   -          -         -
 Accounts payable and accrued liabilities   c   90,191        451    90,642
 Dividend payable                                2,423          -     2,423
----------------------------------------------------------------------------
                                                92,614        451    93,065
Non-current liabilities
 Senior secured debt                        a  188,123      3,920   192,043
 Convertible debentures - debt portion      d  110,708         17   110,725
 Other liabilities                          c    1,218        429     1,647
 Deferred tax liability                     g   39,164      7,692    46,856
 Decommissioning liability                  b   21,903     32,682    54,585
----------------------------------------------------------------------------
TOTAL LIABILITIES                              453,730     45,191   498,921
----------------------------------------------------------------------------
Shareholder's Equity
 Shareholder's capital                    g,h  552,871   (237,035)  315,836
 Convertible debentures - equity portion  d,g    1,850       (829)    1,021
 Contributed surplus                             1,679          -     1,679
 Retained earnings                b,c,d,g,h,j  (16,400)   216,365   199,965
----------------------------------------------------------------------------
TOTAL EQUITY                                   540,000    (21,499)  518,501
----------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES                   993,730     23,692 1,017,422
----------------------------------------------------------------------------


Reconciliation of the Condensed Consolidated Balance Sheets

For the period ended March 31, 2010

(Unaudited - Expressed in thousands of Canadian Dollars)

                                                        Effect of
                                              Previous transition
                                              Canadian         to
                                         Note     GAAP       IFRS      IFRS
----------------------------------------------------------------------------
Assets
Current Assets
 Cash and cash equivalents                           -          -         -
 Accounts receivable                            86,574          -    86,574
 Inventories                                    32,493          -    32,493
 Investment                                      5,171          -     5,171
 Prepaid expenses and other                      5,801          -     5,801
----------------------------------------------------------------------------
                                               130,039          -   130,039
Non-current assets
 Note receivable                                   966          -       966
 Property, plant and equipment            b,e  698,147     19,371   717,518
 Permits and other intangibles                  61,562          -    61,562
 Goodwill                                      103,597          -   103,597
 Deferred tax asset                              1,646          -     1,646
----------------------------------------------------------------------------
TOTAL ASSETS                                   995,957     19,371 1,015,328
----------------------------------------------------------------------------

Liabilities
Current liabilities
 Bank indebtedness                          a        -      6,683     6,683
 Accounts payable and accrued               c
  liabilities                                   78,669      1,386    80,055
 Dividend payable                                2,424          -     2,424
----------------------------------------------------------------------------
                                                81,093      8,069    89,162
----------------------------------------------------------------------------
Non-current liabilities
 Senior secured debt                        a  194,232     (6,683)  187,549
 Convertible debentures - debt portion      d  111,039         13   111,052
 Other liabilities                          c    1,691          2     1,693
 Deferred tax liability                     g   41,484      7,563    49,047
 Decommissioning liability                  b   22,121     32,678    54,799
----------------------------------------------------------------------------
TOTAL LIABILITIES                              451,660     41,642   493,302
----------------------------------------------------------------------------
Shareholder's Equity
 Shareholder's capital                    g,h  552,871   (237,035)  315,836
 Convertible debentures - equity portion  d,g    1,850       (829)    1,021
 Contributed surplus                             1,679          -     1,679
 Retained earnings              b,c,d,e,g,h,j  (13,102)   215,593   202,491
 Accumulated other comprehensive income            999          -       999
----------------------------------------------------------------------------
TOTAL EQUITY                                   544,297    (22,271)  522,026
----------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES                   995,957     19,371 1,015,328
----------------------------------------------------------------------------


Reconciliation of the Condensed Consolidated Balance Sheets

As at December 31, 2010

(Unaudited - Expressed in thousands of Canadian Dollars)

                                                        Effect of
                                              Previous transition
                                              Canadian         to
                                        Note      GAAP       IFRS      IFRS
----------------------------------------------------------------------------
Assets
Current Assets
 Cash and cash equivalents                           -          -         -
 Accounts receivable                           102,378          -   102,378
 Inventories                                    26,645          -    26,645
 Available for sale investment                   4,274          -     4,274
 Prepaid expenses and other                      7,292          -     7,292
----------------------------------------------------------------------------
                                               140,589          -   140,589
Non-current assets
 Note receivable                                   890          -       890
 Property, plant and equipment           b,e   722,840     18,953   741,793
 Permits and other intangibles                  60,579          -    60,579
 Goodwill                                      102,897          -   102,897
 Deferred tax asset                                929          -       929
----------------------------------------------------------------------------
TOTAL ASSETS                                 1,028,724     18,953 1,047,677
----------------------------------------------------------------------------

Liabilities
Current liabilities
 Bank indebtedness                         a         -        169       169
 Accounts payable and accrued liabilities  c   118,218      2,152   120,370
 Dividend payable                                3,152          -     3,152
----------------------------------------------------------------------------
                                               121,370      2,321   123,691
Non-current liabilities
 Senior secured debt                       a    51,689       (169)   51,520
 Convertible debentures - debt portion     d   112,073          1   112,074
 Senior unsecured debentures                   122,050          -   122,050
 Other liabilities                         c     5,063        264     5,327
 Deferred tax liability                    g    47,183      7,308    54,491
 Decommissioning liability                 b    21,700     32,668    54,368
----------------------------------------------------------------------------
TOTAL LIABILITIES                              481,128     42,393   523,521
----------------------------------------------------------------------------
Shareholder's Equity
 Shareholder's capital                   g,h   552,969   (237,035)  315,934
 Convertible debentures - equity         d,g
  portion                                        1,850       (829)    1,021
 Contributed surplus                             1,679          -     1,679
 Retained earnings             b,c,d,e,g,h,j    (9,489)   214,424   204,935
 Accumulated other comprehensive income            587          -       587
----------------------------------------------------------------------------
TOTAL EQUITY                                   547,596    (23,440)  524,156
----------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES                 1,028,724     18,953 1,047,677
----------------------------------------------------------------------------


Reconciliation of the Condensed Consolidated Statements of Operations and
Comprehensive Income

For the three months ended March 31, 2010

(Unaudited - Expressed in thousands of Canadian Dollars)
                                                        Effect of
                                              Canadian transition
                                       Note       GAAP    to IFRS      IFRS
----------------------------------------------------------------------------

Revenue                                        131,240          -   131,240
Operating expenses                        i     88,058    (88,058)        -
Cost of sales                           b,i          -     98,451    98,451
----------------------------------------------------------------------------
Gross profit                                                         32,789
----------------------------------------------------------------------------
 Selling, general and administrative    c,i     15,619      3,130    18,749
 Research and development                          193          -       193
 Finance charges                    b,d,e,f      6,252        484     6,736
 Amortization                             i     13,105    (13,105)        -
----------------------------------------------------------------------------
Earnings before taxes                            8,013       (902)    7,111
----------------------------------------------------------------------------
Provisions for income taxes
 Current                                           128          -       128
 Deferred                                 g      2,163       (129)    2,034
----------------------------------------------------------------------------
                                                 2,291       (129)    2,162
Net earnings                              j      5,722       (773)    4,949
----------------------------------------------------------------------------
Other comprehensive income                         999          -       999
----------------------------------------------------------------------------
Total comprehensive income                j      6,721       (773)    5,948
----------------------------------------------------------------------------

 Basic earnings per Share                         0.12      (0.02)     0.10
----------------------------------------------------------------------------
 Diluted earnings per Share                       0.12      (0.02)     0.10
----------------------------------------------------------------------------


Reconciliation of the Condensed Consolidated Statements of Operations and
Comprehensive Income

For the year ended December 31, 2010

(Unaudited - Expressed in thousands of Canadian Dollars)

                                                        Effect of
                                                       transition
                                              Canadian         to
                                       Note       GAAP       IFRS      IFRS
----------------------------------------------------------------------------

Revenue                                        576,196          -   576,196
Operating expenses                        i    394,317   (394,317)        -
Cost of sales                           b,i          -    437,806   437,806
----------------------------------------------------------------------------
Gross profit                                                        138,390
----------------------------------------------------------------------------
 Selling, general and administrative    c,i     70,891     13,675    84,566
 Research and development                        1,713          -     1,713
 Finance charges                    b,d,e,f     25,663      1,151    26,814
 Amortization                             i     55,990    (55,990)        -
----------------------------------------------------------------------------
Earnings before taxes                           27,622     (2,325)   25,297
----------------------------------------------------------------------------
Provisions for income taxes
 Current                                           938          -       938
 Deferred                                 g      8,621       (384)    8,237
----------------------------------------------------------------------------
                                                 9,559       (384)    9,175
----------------------------------------------------------------------------
Net earnings                              j     18,063     (1,941)   16,122
----------------------------------------------------------------------------
Other comprehensive income                         587          -       587
Total comprehensive income                j     18,650     (1,941)   16,709

----------------------------------------------------------------------------
Basic earnings per Share                          0.37      (0.04)     0.33
----------------------------------------------------------------------------
Diluted earnings per Share                        0.37      (0.04)     0.33
----------------------------------------------------------------------------

The following notes provide additional supplementary information regarding the impact of the transition to IFRS:

a. Reclassification of cash and cash equivalents (bank indebtedness)

Under IFRS, within the consolidated balance sheets, cash and cash equivalents (bank indebtedness) are disclosed separately. Under Canadian GAAP, cash and cash equivalents (bank indebtedness) were included as part of senior secured debt.

b. Provision for decommissioning liabilities

As at January 1, 2010, the Corporation conducted an analysis of the discount rate used to calculate the present value of its decommissioning liability.

Under Canadian GAAP - Consistent with IFRS treatment, provisions for decommissioning liabilities were previously measured based on the estimated cost of decommissioning, discounted to its net present value upon initial recognition. Decommissioning liabilities were however not subsequently remeasured to reflect period end discount rates.

Under IFRS - Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, a change in the current market-based discount rate results in a change in the measurement of the provision. As a result, the decommissioning liability recorded has been re-measured using the discount rate in effect at January 1, 2010 and each subsequent reporting period, with an adjustment recorded to the corresponding property, plant and equipment.

Impact on Consolidated Balance Sheets

                                    January 1,      March 31,   December 31,
                                         2010           2010           2010
----------------------------------------------------------------------------
Increase in property, plant and
 equipment                             19,772         19,367         18,150
Increase in decommissioning
 liabilities                          (32,682)       (32,678)       (32,668)
----------------------------------------------------------------------------
Decrease in retained earnings         (12,910)       (13,311)       (14,518)
----------------------------------------------------------------------------


Impact on Consolidated Statements of Comprehensive Income

                                                                 Year ended
                                          Three months ended    December 31,
                                              March 31, 2010           2010
----------------------------------------------------------------------------
Increase in cost of sales                                405          1,620
Decrease in finance charges                               (3)           (12)
----------------------------------------------------------------------------
Net decrease in comprehensive income                     402          1,608
----------------------------------------------------------------------------

c. Share based payments

Measurement of liabilities

Under Canadian GAAP - The Company accounted for the 2006 Plan, the 2008 Plan and the share appreciation rights ("SARs") by reference to their intrinsic value.

Under IFRS - The related liabilities have been adjusted to reflect the fair value of the outstanding incentives plans by applying an option pricing model. As a result, Newalta adjusted expenses associated with its share based incentive plans to reflect the changes of the fair values of these awards.

Forfeitures

Under Canadian GAAP - Forfeitures of awards were recognized as they occurred.

Under IFRS - Forfeiture estimates are recognized on the grant date based on management's best estimate of the expected number of forfeitures to be made in all subsequent periods.

Impact on Consolidated Balance Sheets

                                    January 1,      March 31,   December 31,
                                         2010           2010           2010
----------------------------------------------------------------------------
Increase in accounts payable and
 accrued liabilities                     (451)        (1,386)        (2,152)
Increase in other liabilities            (429)            (2)          (264)
----------------------------------------------------------------------------
Decrease in retained earnings            (880)        (1,388)        (2,416)
----------------------------------------------------------------------------


Impact on Consolidated Statements of Comprehensive Income

                                                                 Year ended
                                          Three months ended    December 31,
                                              March 31, 2010           2010
----------------------------------------------------------------------------
Increase in selling, general and administrative          508          1,536
----------------------------------------------------------------------------
Decrease in comprehensive income                        (508)        (1,536)
----------------------------------------------------------------------------

d. Convertible debentures

Initial measurement of debt and equity portions

Under Canadian GAAP - Initially, the fair value of liability and equity component is measured separately. The value of the liability and equity components is then adjusted on a pro-rata basis so that the sum equals the total value of the convertible debenture.

Under IFRS - As these debentures were issued prior to the Corporation's conversion from a Trust, the option to convert the debt into equity in the form of trust units was considered a derivative financial instrument. The option to settle the debt in Trust units caused it to be classified as a financial liability rather than an equity instrument up until the date of conversion from a Trust to a Corporation on December 31, 2008.

This resulted in the derivative being measured at fair value through net earnings and the liability portion being measured at amortized cost up until December 31, 2008. Upon conversion to a Corporation, the derivative value was allocated to equity.

Issuance costs

Under Canadian GAAP - Transaction costs associated with the issuance of the convertible debentures are included in the financial liability.

Under IFRS - Transactions costs that are directly attributable to the issuance of the convertible debentures are allocated to the liability and equity component of the convertible debenture at initial recognition.

Impact on Consolidated Balance Sheets

                                    January 1,      March 31,      December
                                         2010           2010       31, 2010
----------------------------------------------------------------------------
Increase in convertible debenture
 - debt portion                           (17)           (13)            (1)
Decrease in convertible debenture
 equity portion                           479            479            479
----------------------------------------------------------------------------
Increase in retained earnings             462            466            478
----------------------------------------------------------------------------


Impact on Consolidated Statements of Comprehensive Income

                                                                 Year ended
                                          Three months ended    December 31,
                                              March 31, 2010           2010
----------------------------------------------------------------------------
Decrease in finance charges                               (4)           (16)
----------------------------------------------------------------------------
Increase in comprehensive income                           4             16
----------------------------------------------------------------------------

e. Capitalized borrowing costs

Under IFRS, an entity must capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, as part of the cost of that asset.

Impact on Consolidated Balance Sheets

                                    January 1,      March 31,   December 31,
                                         2010           2010           2010
----------------------------------------------------------------------------
Increase in property, plant and
 equipment                                  -              4            803
----------------------------------------------------------------------------
Increase in retained earnings               -              4            803
----------------------------------------------------------------------------


Impact on Consolidated Statements of Comprehensive Income

                                                                 Year ended
                                          Three months ended    December 31,
                                              March 31, 2010           2010
----------------------------------------------------------------------------
Decrease in finance charges                               (4)          (803)
----------------------------------------------------------------------------
Increase in comprehensive income                           4            803
----------------------------------------------------------------------------

f. Reclassification of the unwinding of discount associated with decommissioning liabilities

Under Canadian GAAP - The unwinding of the discount associated with decommissioning liabilities was presented in the consolidated statements of operations within amortization expense.

Under IFRS - The unwinding of the discount associated with decommissioning liabilities is presented in the consolidated statements of operations within finance charges.

Impact on Consolidated Statements of Comprehensive Income

                                                                 Year ended
                                          Three months ended    December 31,
                                              March 31, 2010           2010
----------------------------------------------------------------------------
Decrease in amortization expense                        (495)        (1,982)
Increase in finance charges                              495          1,982
----------------------------------------------------------------------------
Increase (decrease) in comprehensive income                -              -
----------------------------------------------------------------------------

g. Deferred tax

Impact of conversion from a Trust to Corporation on December 31, 2008

Under Canadian GAAP - Income accounting is applied for share issue costs and any related future income tax that was created at the time of conversion from a Trust to a Corporation.

Under IFRS - The tax impact is classified according to the nature of the transaction. In the case of the conversion from a Trust to a Corporation, deferred taxes associated with the share issuance costs resulting from the conversion, are recorded as an adjustment to shareholder's capital.

Convertible debentures

Under Canadian GAAP - Deferred income tax related to the equity portion of the convertible debentures are recognized through earnings.

Under IFRS- The tax impact is classified according to the nature of the transaction. In the case of the bifurcation of the convertible debentures, the deferred tax impact is recorded as an adjustment to the equity portion of the convertible debentures.

Tax basis of intangible assets, including goodwill

Under Canadian GAAP - The tax basis of intangible assets included the balance in the cumulative eligible capital pool plus the non-taxable portion (25% of the carrying amount). This would effectively eliminate any deferred tax on intangible assets upon acquisition.

Under IFRS - Deferred taxes are not recognized where goodwill or intangibles are acquired outside of a business combination. As Newalta's goodwill and intangible assets have predominantly been acquired through business combinations, this results in a deferred tax liability.

Impact on Consolidated Balance Sheets

                                    January 1,      March 31,      December
                                         2010           2010       31, 2010
----------------------------------------------------------------------------
Increase in shareholder's capital
 (note h)                                (971)          (971)          (971)
Decrease in convertible debenture
 equity portion                           350            350            350
Increase in deferred tax liability     (7,692)        (7,563)        (7,308)
----------------------------------------------------------------------------
Decrease in retained earnings          (8,313)        (8,184)        (7,929)
----------------------------------------------------------------------------

Other earnings adjustments

The first quarter and full year earnings adjustments related to capitalization of borrowing costs, decommissioning liabilities, share-based payments and convertible debentures discussed in b) through e) above, had the following additional tax related impact on the Consolidated Statements of Comprehensive Income:

                                                                 Year ended
                                          Three months ended    December 31,
                                              March 31, 2010           2010
----------------------------------------------------------------------------
Decrease in provision for deferred taxes                (129)          (384)
----------------------------------------------------------------------------
Increase in comprehensive income                         129            384
----------------------------------------------------------------------------

h. Shareholders' Capital

Impact of conversion from a Trust to Corporation on December 31, 2008

Under Canadian GAAP - Trust units issued under the Trust Indenture in place prior to our conversion to a Corporation were considered equity.

Under IFRS - Trust units issued prior to our conversion to a Corporation were classified as a financial liability rather than an equity instrument. As a result, the liability associated with the trust units was measured at fair value through net earnings up until December 31, 2008, the date of conversion from a Trust to a Corporation.

Impact on Consolidated Balance Sheets

                                    January 1,      March 31,      December
                                         2010           2010       31, 2010
----------------------------------------------------------------------------
Decrease in shareholder's capital    (238,006)      (238,006)      (238,006)
----------------------------------------------------------------------------
Increase in retained earnings         238,006        238,006        238,006
----------------------------------------------------------------------------

This change had no impact on our Statements of Comprehensive Income for the three months ended March 31, 2010 or the year ended December 31, 2010.

i. Summary of presentation changes to cost of sales and selling, general and administrative expense, and reclassification of unwinding of discount to finance charges

Operating expenses presented as cost of sales

Under Canadian GAAP - Operating expenses were presented as a separate line item within the consolidated statement of operations.

Under IFRS- Operating expenses of 88,058 for the three months ended March 31, 2010 and 394,317 for the year ended December 31, 2010, are now presented within the consolidated statement of operations and comprehensive income, as cost of sales.

Amortization presented based on function of expense

Under Canadian GAAP - Amortization of property, plant and equipment was presented as a separate line item within the consolidated statement of operations.

Under IFRS- The amortization of property, plant and equipment and intangible assets is now presented based on the function of expense to which its relates, being either part of cost of sales or part of selling, general and administrative expense.

Unwinding of discount related to decommissioning liabilities presented as finance charges

Under Canadian GAAP - The expense associated with the unwinding of the discount related to decommissioning liabilities was presented as part of amortization expense within the consolidated statement of operations.

Under IFRS - The expenses associated with the unwinding of the discount related to decommissioning liabilities is presented as finance charges.

Impact on Consolidated Statements of Comprehensive Income

                                                Three months     Year ended
                                                       ended    December 31,
                                         Note March 31, 2010           2010
----------------------------------------------------------------------------
Amortization disclosed separately under
 Canadian GAAP                                       (13,105)       (55,990)
Amortization allocated to cost of sales                9,988         41,869
Amortization allocated to selling,
 general and administrative expense                    2,622         12,139
Unwinding of discount reclassified to       
 finance                                    f            495          1,982
----------------------------------------------------------------------------
Net decrease in comprehensive income                       -              -
----------------------------------------------------------------------------


j. Summary of changes to retained earnings and comprehensive income:

Impact on Consolidated Balance Sheets

                                               January 1,    March December
                                         Note       2010  31, 2010 31, 2010
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Decommissioning liability increase net      
 impact                                     b    (12,910)  (13,311) (14,518)
Share-based payments liability valuation    
 impact                                     c       (880)   (1,388)  (2,416)
Convertible debentures valuation impact     d        462       466      478
Capitalization of borrowing costs impact    e          -         4      803
Deferred tax impact                         g     (8,313)   (8,184)  (7,929)
Shareholder's capital re-measurement due    
 to trust units                             h    238,006   238,006  238,006
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Increase in retained earnings                    216,365   215,593  214,424
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Impact on Consolidated Statements of Comprehensive Income

                                                Three months     Year ended
                                                       ended    December 31,
                                         Note March 31, 2010           2010
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Decommissioning liability impact            b           (402)        (1,608)
Share-based payments valuation impact       c           (508)        (1,536)
Convertible debentures accretion impact     d              4             16
Capitalization of borrowing costs           e              4            803
Deferred tax impact                         g            129            384
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Increase in comprehensive income                        (773)        (1,941)
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k. Statement of cash flows

Consistent with requirement of IAS 7, Statement of Cash Flows, interest paid and income taxes paid are now disclosed separately in the Statement of Cash Flows.

Additionally, borrowing costs capitalized in relation to qualifying assets are presented within additions to property, plant and equipment ($0.1 million for three months ended March 31, 2011 and nil for the same period in 2010).

There are no other material differences between the statement of cash flows presented under IFRS and the statement of cash flows presented under previous Canadian GAAP.

For further information: Anne M. Plasterer,,Executive Director, Investor Relations, (403) 806-7019, www.newalta.com