## MESSAGE TO SHAREHOLDERS 

Our portfolio today features a lower risk profile and higher growth potential than it did a few years ago. We expect our portfolio’s value to increase as our new wind power projects move into commercial operations and as Bristol Water’s regulated capital value grows. 

## Dear Fellow Shareholders: 

In 2013, Capstone delivered strong fi nancial performance. We also advanced our strategy to transform our business, lower our risk profile and build for tomorrow. 

We achieved Adjusted EBITDA of $128.4 million, at the higher end of our range of expectations, reflecting strong operations across our businesses as well as three months of contribution from the operating wind power facilities we added to our portfolio in October 2013. 

We also realized two of the three priorities we set for ourselves in 2013 while making significant progress on the third. 

## Our Priorities 

## We executed our growth strategy by acquiring Renewable Energy Developers Inc. (ReD) 

The acquisition of ReD, a proven wind power developer, expands our complement of operating wind power facilities to a total of 194 net megawatts in Ontario and Nova Scotia, and establishes a new foothold in the wind power development arena. With a contracted development pipeline totalling an expected net 79 megawatts, we are now cultivating a higher return niche within our portfolio that will begin to contribute new cash fl ow to Capstone starting in 2014 and beyond as our development 

Our Corporate Objectives 

projects reach commercial operations, delivering accretive growth and value for shareholders. Two of our new development projects started construction in November 2013 with a third expected to get underway in 2014. 

## We maximized performance by enhancing the cash fl ow potential of our businesses 

We constantly challenge ourselves to find new ways to enhance the effi ciency and quality of our operations. These initiatives include predictive and preventive maintenance, detailed planning for capital expenditures that boost value, and the deployment of innovative tools to generate additional cash flow from our businesses. In 2013, these tools included the sale of renewable energy credits by Whitecourt, which contributed approximately $1 million in revenue, and the installation of WindBOOST at Erie Shores, a software tool that we expect to increase the facility’s annual production by about 1% to 3%. At Bristol Water, we continued to work closely with management to execute the company’s approximately C$520 million capital expenditure program for the current regulatory period that began in April 2010 and concludes in March 2015. This program, which is aimed at improving and expanding the company’s network of reservoirs, treatment facilities, water mains and pipes, will drive growth in Bristol Water’s regulated capital value, and accordingly, value for Capstone and our shareholders. 

## Grow 

Create shareholder value by adding infrastructure businesses that increase scale, expand future opportunities and potentially off er synergies. 

## Engage 

Provide a work environment that attracts and retains skilled employees. 

