The Company has a number of other projects in various stages of development and it continues to evaluate acquisition prospects, primarily in the U.S., to strengthen its regional footprint and existing portfolio. To help ensure that the Company’s financial condition is not compromised by its growth strategy, it has set internal rates of return targets for acquisition and development project opportunities. As part of the Company’s growth strategy through developing and building new assets, the Company has chosen to make construction a core competency. 

## Regional footprint 

Capital Power intends to confine its regional footprint to Canada and the U.S. and seeks to enhance its regional diversification by focusing on a select group of target markets across Canada and the U.S. Capital Power uses a disciplined approach to select target regions with a preference for markets with favourable long-term fundamentals and spark spreads, including regulatory frameworks conducive to competitive power generation, sufficient scale to support the establishment of a networked hub of power facilities, and liquid trading markets. Spark spread means the theoretical difference between the price of electricity as the output and its energy cost of production. 

## Networked hub strategy 

The Company’s networked hub strategy is to manage power generation assets at the hub level rather than by individual facility in order to be a cost-effective provider of electricity in the Company’s markets. The foundation of this strategy is to establish generation hubs by acquiring larger-scale, fossil-fuel based power plants supplemented by renewable facilities, in the Company’s markets. In order to reduce purchasing, warehousing, inventory and other costs, the Company seeks to standardize these plants by fuel type and technology. The Company then seeks to enter into a mix of unit specific and non-unit specific contracts to provide it with flexibility in deploying its generation assets. The availability of physical generation from multiple sources in a market area provides the Company with the flexibility to optimize its portfolio of assets in the networked hub in response to changes in commodity prices. The Company believes that its approach of managing assets at the hub level improves efficiency and reduces risk through portfolio diversification. 

Capital Power intends to maintain its existing strong position in Alberta and focus on developing additional hubs in the following three regions: Mid-Atlantic U.S., including the PJM (Pennsylvania, New Jersey and Maryland) Interconnection and the Virginia-Carolinas; the North East U.S., including the New York Independent System Operator and the New England Power Pool (NEPOOL); and the South West U.S., including the California Independent System Operator and Desert South West (Arizona, New Mexico and Nevada). In addition, other North American markets, especially where Capital Power has existing operations, are considered on a case-by-case basis if opportunities arise for the development of contracted facilities. 

## Technology preference 

In its selection of future power generation technologies, Capital Power plans to capture economies of scale, accommodate emerging market supply and demand trends, and further develop distinctive competencies. The Company expects to focus primarily on larger-scale, fossil fuel-fired technologies, supplemented by renewable wind facilities that are economically attractive and supportive of the Company’s long-term contracting position. Fossil fuel- fired facilities will remain a core component of the Company’s portfolio. However, given the emerging opportunities in the Company’s target markets, the Company is pursuing development and acquisition opportunities for solar power. 

## Forward-looking Information 

Forward-looking information or statements included in this MD&A are provided to inform the Company’s shareholders and potential investors about management’s assessment of Capital Power’s future plans and operations. This information may not be appropriate for other purposes. The forward-looking information in this MD&A is generally identified by words such as “will”, “anticipate”, “believe”, “plan”, “intend”, “target”, and “expect” or similar words that suggest future outcomes. 

Material forward-looking information in this MD&A includes information with respect to: (i) expectations related to future earnings and funds from operations, (ii) expectations regarding the future pricing of electricity and market fundamentals in existing and target markets, (iii) expectations regarding fuel supply and pricing, (iv) expectations related to the Company’s future cash requirements including interest and principal repayments, capital expenditures and dividends, (v) expectations for the Company’s sources of funding, adequacy and availability of committed bank credit facilities and future borrowings, (vi) expectations regarding future growth and emerging opportunities in the Company’s target markets including the focus on certain technologies, (vii) expectations regarding the timing of, funding of, and costs for existing, planned and potential development projects and acquisitions, (viii) expectations regarding plant availability, and (ix) expectations regarding capital expenditures for plant maintenance and other. 

