vesting periods while ensuring that the cumulative amount of compensation cost recognized at least equals the value of the vested portion of the award at that date. 

## PERFORMANCE SHARE UNITS 

In October 2011, APUC issued 21,123 performance share units (“PSUs”) to certain members of management other than senior executives as part of APUC’s long-term incentive program. The PSUs provide for settlement in cash or shares at the election of APUC. As APUC does not expect to settle these instruments in cash, these PSUs are accounted for as equity awards. 

## DIRECTORS DEFERRED SHARE UNITS 

APUC has a Deferred Share Unit Plan. Under the plan, non-employee directors of APUC may elect annually to receive all or any portion of their compensation in deferred share units (“DSUs”) in lieu of cash compensation. The DSUs provide for settlement in cash or shares at the election of APUC. As APUC does not expect to settle the DSU’s in cash, these DSUs are accounted for as equity awards. 

As at December 31, 2012, 50,172 DSUs had been granted. 

## EMPLOYEE SHARE PURCHASE PLAN 

APUC has an employee share purchase plan (the “ESPP”) which allows eligible employees to use a portion of their earnings to purchase common shares of APUC. The aggregate number of shares reserved for issuance from treasury by APUC under this plan shall not exceed 2,000,000 shares. As at December 31, 2012, a total of 61,403 shares had been issued under the ESPP. 

## MANAGEMENT OF CAPITAL STRUCTURE 

APUC views its capital structure in terms of its debt levels, both at a project and an overall company level, in conjunction with its equity balances. 

APUC’s objectives when managing capital are: 

x To maintain its capital structure consistent with investment grade credit metrics appropriate to the sectors in which APUC operates; 

x To maintain appropriate debt and equity levels in conjunction with standard industry practices and to limit financial constraints on the use of capital; 

x To ensure capital is available to finance capital expenditures sufficient to maintain existing assets; 

To ensure generation of cash is sufficient to fund sustainable dividends to shareholders as well as meet current tax and internal capital requirements; 

x To maintain sufficient cash reserves on hand to ensure sustainable dividends made to shareholders; and 

x To have proper credit facilities available for ongoing investment in growth and investment in development opportunities. 

APUC monitors its cash position on a regular basis to ensure funds are available to meet current normal as well as capital and other expenditures. In addition, APUC continuously reviews its capital structure to ensure its individual business units are using a capital structure which is appropriate for their respective industries. 

## RELATED PARTY TRANSACTIONS 

Certain executives of APUC are shareholders of Algonquin Power Management Inc. (“APMI”), the former manager of the Company. A member of the Board of Directors of APUC is an executive at Emera. 

Transactions with APMI and Senior Executives 

x APUC has leased its head office facilities since 2001 from an entity owned by the shareholders of APMI on a triple net basis. Base lease costs for the year ended December 31, 2012 were $333 (2011 - $327). 

x APUC utilizes chartered aircraft, including the use of an aircraft owned by an affiliate of APMI, Algonquin Airlink Inc. In 2004, APUC remitted $1,300 to the affiliate as an advance against expense reimbursements (including engine utilization reserves) for APUC’s business use of the aircraft. During the year ended December 31, 2012, APUC incurred costs in connection with the use of the aircraft of $598 (2011 - $453) 

