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## Funds from operations and funds from operations excluding non-controlling interests in CPILP 

Capital Power uses funds from operations as a measure of the Company’s ability to generate cash from its current operating activities to fund capital expenditures, debt repayments, dividends to the Company’s shareholders and distributions to non-controlling interests. Funds from operations are net cash flows from operating activities, including finance and current income tax expenses, and excluding changes in working capital. The Company includes interest and current income tax expenses recorded during the period rather than interest and income taxes paid. The timing of cash receipts and payments of interest and income taxes and the resulting cash basis amounts are not comparable from period to period. The timing of cash receipts and payments also affects the period-to-period comparability of changes in operating working capital which are also excluded from funds from operations. 

The Company divested its 29% indirect ownership of CPILP as of November 5, 2011. Prior to the sale, the Company used funds from operations excluding non-controlling interests in CPILP to provide a more meaningful measure of the Company’s operating cash flows since the non-controlling interests in CPILP’s funds from operations were approximately 71%. 

A reconciliation of net cash flows from operating activities to (i) funds from operations and (ii) funds from operations excluding non-controlling interests in CPILP is as follows: 

<img src='content_image/183188.jpg'>

