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## ALGONQUIN POWER & UTILITIES CORP. 

Notes to the Consolidated Financial Statements 

December 31, 2012 and 2011 

 (in thousands of Canadian dollars except as noted and amounts per share) 

## 20. Basic and diluted net earnings per share (continued) 

The reconciliation of the net income and the weighted average shares used in the computation of basic and diluted earnings per share are as follows: 

<img src='content_image/165638.jpg'>

The shares potentially issuable as a result of the convertible debentures as well as stock options of 1,354,531 respectively (2011 – 1,326,900) are excluded from this calculation as they are anti- dilutive. 

## 21. Commitments and contingencies 

a) Contingencies 

APUC and its subsidiaries are involved in various claims and litigation arising out of the ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider APUC’s exposure to such litigation to be material to these financial statements, with the exception of those matters described below. Accruals for any contingencies related to these items are recorded in the financial statements at the time it is concluded that its occurrence is probable and the related liability is estimable. 

i) On October 21, 2011 the Québec Court of Appeal ordered a subsidiary of APUC to pay approximately $5,400 (including interest) to the government of Québec relating to water lease payments that the APUC subsidiary has been paying to the St. Lawrence Seaway Management Corporation (“Seaway Management”) under its water lease with Seaway Management in prior years. 

The water lease with Seaway Management contains an indemnification clause which management believes mitigates this claim and management intends to vigorously defend its position. As a result, the probability of loss, if any, and its quantification cannot be estimated at this time but could range from $nil to $5,800. In 2012, the Company paid an amount of $1,884 (2011 - $ nil) to the government of Québec in relation to the early years covered by the claim in order to mitigate the impact of accruing interests on any amount ultimately determined to be payable or recoverable. 

