HispanicBusiness

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 stock-based compensation expense recorded as a selling, general and administrative expense that is recognized over the vesting period of the options, with a corresponding increase to contributed surplus. When options are exercised, the proceeds, together with the amount recorded in contributed surplus, are transferred to shareholders' capital. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

The 2006 Plan and the 2008 Plan are both stock-based payment awards that allow for individuals to settle their options in cash. The fair value at the date of grant is calculated using the Black-Scholes option pricing model method with the stock-based compensation expense recorded as a selling, general and administrative expense that is recognized over the vesting period of the options with a corresponding entry to either accrued liabilities or other liabilities. The fair value is subsequently re-measured at the end of each reporting period. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

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 Newalta's common shares on the exercise date. The grant price is calculated based on the five-day volume weighted average trading price of Newalta's Shares on the Toronto stock exchange ("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 stock-based compensation expense recognized over the vesting period of the options and recorded as a selling, general and administrative expense with a corresponding entry to accrued liabilities or other liabilities. The fair value is subsequently re-measured at the end of each reporting period. Forfeitures are estimated and accounted for at the grant date and adjusted, if necessary, in subsequent periods.

Share units

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

A cash-settled Performance Share Unit ("PSUs") incentive plan has been established for officers and other eligible employees. Under this plan, notional PSUs may be granted based on corporate performance criterion and vest after three years. The vested PSUs are automatically paid out in cash upon vesting at a value determined by the fair market value of the Corporation's 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 stock-based compensation expense of the PSUs is recorded as a selling, general and administrative expense on a straight-line basis over the vesting period with a corresponding entry to either accrued liabilities or other liabilities. This estimated value is adjusted each period based on the period-end trading price of the 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.