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## OPERATIONAL EXCELLENCE 

We have maintained high operating availability over a growing fl eet and production volumes. Our average plant availability was 91% in 2012, and it has averaged 92% during the past four years – a period when our actual megawatt production has nearly doubled. In 2013, we are targeting a comparable 93% average plant availability. 

## INVESTMENT GRADE CREDIT RATING AND CONSISTENT ACCESS TO LOW COST CAPITAL 

Our investment grade credit rating that provides access to low cost capital is a key component of our strategy, and we are firmly committed to maintaining the rating. Our long-term debt-to-capital ratio target of 40-50% provides a strong metric to support the credit rating. We continue to have strong access to the capital markets as noted by the successful $400 million of capital raised in 2012, through a $150 million preferred shares offering and a $250 million debt offering to fund our growth. 

## BALANCE OF CONTRACTED AND MERCHANT GENERATION 

Maintaining a strong base of contracted cash flow from creditworthy counterparties is the cornerstone of Capital Power’s ability to meet our fi xed commitments and dividends through all business cycles. Looking ahead to 2015 when the two Ontario wind projects and the Shepard facility are completed, our contracted megawatts will increase to 47% of our portfolio compared to 42% today. Contracted cash flows provide Capital Power with a stable financial base, while the merchant cash flows provide upside with higher power prices. 

“Our strategy is to create shareholder value through operational excellence, maintaining or enhancing our financial strength and flexibility, and disciplined growth.” 

With the Capital Power Energy Centre operating as a merchant facility when it begins operations later in the decade, our current focus is on contracted development projects in Canada and the US in order to maintain a balance of contracted and merchant assets in our portfolio. 

## FINANCIAL PERFORMANCE 

Capital Power’s financial performance in 2012 was mixed, with normalized earnings per share (EPS) falling signifi cantly below target while cash flow performance met the target. Our financial targets, which we announced in December 2011, were based on an average Alberta power price forecast of $74 per megawatt hour (MWh) for 2012, which was used to set the target range of $1.50 to $1.70 for normalized EPS. Normalized EPS of $1.29 came in below target primarily due to a lower-than-expected average Alberta power price of $64/MWh, a one-time settlement loss on the heat rate option for the Bridgeport facility, and lower earnings from the North East U.S. plants primarily from an unplanned outage. Despite being below our earnings target, the company continues to generate strong cash fl ow with $381 million in funds from operations in 2012, which represented an 8.2% increase from the prior year and was within our target range. 

## LOOKING AHEAD 

There’s been a tremendous amount of change in our asset portfolio over the last four years. We have reduced our geographical footprint and our range of technologies to ensure that our growth remains focused and disciplined and 

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reflects the competitive landscape for market opportunities. We have also divested our small interests so we could focus on signifi cant investments. 

For 2013, management is focused on delivering strong operational performance across the fleet, improving performance from our US assets, completing the Port Dover and Nanticoke wind project, continuing the development of K2 Wind Ontario project, and working with ENMAX on the construction of the Shepard facility for a successful completion in 2015. 

Looking ahead, we continue to focus on developing our competitive advantages – our people, our market intelligence, the development and construction of generation facilities, and the optimization of our existing assets. With our investments in the Shepard facility and Capital Power Energy Centre, Capital Power will continue to be a dominant power producer in Alberta and will have the best fleet of power generation assets in the province. All of these initiatives are aligned with our strategy of being a competitive power producer and positions us to deliver shareholder value. 

Thank you for your continued support. 

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