## Strategies for managing PPA contract risk 

 Measure performance against benchmarks. 

 Execute appropriate operating and maintenance practices to minimize the likelihood of prolonged unplanned down time. 

The occurrence of an event which disrupts the ability of the Sundance power plants to produce or sell power or thermal energy for an extended period under the Sundance PPA would likely require Capital Power to replace the electricity at market rates prevailing at that time, although it would be relieved of the obligation to pay the unit capacity fee. Depending on market liquidity, these market prices could be significantly higher than the prices inherent in the Sundance PPA, thus increasing the cost of energy purchases to Capital Power. 

## Strategies for managing Sundance PPA risk 

 Work with plant owner to execute appropriate operating and maintenance practices to minimize the likelihood of prolonged unplanned down time. 

 Proactively assess and appropriately respond to, including legal actions, any claims of force majeure incidents. 

In 2011, Capital Power initiated two information technology implementation projects, one for an Energy Trading Risk Management system and another for an Enterprise Resource Planning system which have been substantially implemented. These systems are expected to support the Company’s long-term strategy since they are planned to provide the flexibility and scalability necessary for Capital Power’s business. During the final stages of implementation in 2013, existing processes and internal resources will be strained which will increase the potential for errors in the related transactions and for failure to successfully implement the new systems on time and on budget. There are no further major information technology system implementations planned for 2013. 

## Strategies for managing major information technology system implementation risk 

 Minimize the customization of the associated software, monitor the impacts on processes and internal controls and undertake remedial actions, as required. 

 Ensure projects are properly resourced with qualified staff and contractors. 

Capital Power employs several key computer application systems to support its operations, such as electricity plant control systems in addition to the major energy trading risk management and enterprise resource planning systems. Failure of any of these systems could result in significant lost revenues, increased costs or regulatory fines. 

## Liquidity, credit and financing risk 

Capital Power's ability to fund current and future capital requirements, along with its working capital needs is dependent upon access to financial markets. Uncertainty and volatility in the Canadian and U.S. financial markets may adversely affect Capital Power's ability to access and arrange financing under favourable terms and conditions. The cost of capital will also depend upon prevailing market conditions as well as the business performance of Capital Power as indicated by the assigned corporate credit ratings. See Liquidity and Capital Resources. If Capital Power is unable to access sufficient amounts of capital on terms acceptable to Capital Power, it could have an adverse effect on Capital Power's business plan and financial condition. 

When Capital Power uses financial instruments to sell power forward, it may be required to post significant amounts of cash collateral or other credit support to its counterparties. 

Strategies for managing liquidity risk: 

 Monitor cash and currency requirements on regular basis by preparing short-term and long-term cash flow forecasts and by matching the maturity profiles of financial assets and liabilities to identify financing requirements. 

 Meet financing requirements through a combination of committed and demand revolving credit facilities, financings in public and private capital debt markets, and equity offerings. 

