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## DEAR SHAREHOLDERS 

## MESSAGE FROM THE CHAIRMAN 

Since Capital Power’s initial public offering in July 2009, the Board has provided independent leadership and oversight in guiding the company’s growth through acquisitions, divestitures and developments. This past year’s results were mixed with the company facing a number of challenging headwinds but overall, progress was made towards the goal of establishing Capital Power as one of North America’s most respected, reliable, and competitive power generators. 

Each year, Capital Power’s strategy is tested by the Board to ensure the company continues to be well positioned to deliver a stable long-term competitive shareholder return. This year’s review confi rmed the current strategy continues to be the right strategy for the company. Successful execution of this strategy was evident in 2012 as the company continued to provide safe reliable operations, completed successful offerings of debt and equity to fund growth, and developed the Quality Wind and Halkirk Wind projects on time and under budget. 

A critical area of Board oversight is enterprise risk management. The Board is actively engaged with management in identifying, understanding and mitigating risks, particularly during uncertain economic conditions. Given the outlook for softer Alberta power prices in the medium term, a joint venture agreement for the development and ownership of ENMAX’s Shepard Energy Centre was entered into last December. The transaction also included various commercial agreements that increased Capital Power’s overall contracted position that signifi cantly reduced its electricity price and volume risk. 

The Board recognizes the climate of rising shareholder and stakeholder activism that exists today and continually looks at ways to improve dialogue with its shareholders. We appreciate that shareholders have a very legitimate interest in how the company is operating and governed. 

As part of our commitment to shareholder engagement, shareholders have the opportunity to vote on our second ‘say on pay’ advisory vote on executive compensation at the 2013 annual meeting. Despite receiving 99% approval from shareholders on ‘say on pay’ last year that strongly supported our approach to executive compensation, we believe it’s important to continue receiving direct feedback from our shareholders on this important matter. 

Shareholders will also be voting on a Shareholder Rights Plan and the Advance Notice By-law. The primary objective of the Rights Plan is to ensure the fair treatment of all shareholders in the event that an unsolicited take-over bid for Capital Power is ever made and to provide the Board with sufficient time to evaluate the unsolicited bid and explore other options to maximize shareholder value. The Rights Plan was adopted by the Board last November; however, it must be ratified by our shareholders and fi led with the Toronto Stock Exchange. If the Rights Plan is approved, it will remain in effect until the end of our 2016 annual meeting. The purpose of the Advance Notice By-law is to ensure all shareholders receive adequate notice and information about nominated directors, so that they can make informed voting decisions. 

On behalf of the Board, I would like to thank all of the people of Capital Power for their work and achievements in 2012, and welcome our shareholders to the upcoming annual meeting. 

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We look forward to meeting you, hearing your thoughts and speaking with you. 

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