x The Liberty Facility had $27.4 million outstanding as at December 31, 2012. As a result, a 100 basis point change in the variable rate charged would impact interest expense by $0.3 million annually. 

APUC does not actively manage interest rate risk on its variable interest rate borrowings due to the primarily short term and revolving nature of the amounts drawn. 

## Liquidity risk 

Liquidity risk is the risk that APUC and its subsidiaries will not be able to meet their financial obligations as they become due. 

Both APCo and Liberty have established financing platforms to access new liquidity from the capital markets as requirements arise. APUC continually monitors the maturity profile of its debt and adjusts accordingly to ensure sufficient liquidity exists at each of APCo and Liberty Utilities to meet their liabilities when due. 

As at December 31, 2012, APUC and its subsidiaries had a combined $224.3 million of committed and available credit facilities remaining and $53.1 million of cash resulting in $277.4 million of total liquidity and capital reserves. 

APUC currently pays a dividend of $0.31 per common share per year. The Board determines the amount of dividends to be paid, consistent with APUC’s commitment to the stability and sustainability of future dividends, after providing for amounts required to administer and operate APUC and its subsidiaries, for capital expenditures in growth and development opportunities, to meet current tax requirements and to fund working capital that, in its judgment, ensures APUC’s long-term success. Based on the level of dividends paid during the year ended December 31, 2012, cash provided by operating activities exceeded dividends declared by 1.8 times and exceeds Adjusted Cash From Operations by 2.1 times. 

The long term portion of debt totals approximately $770.9 million with maturities set out in the Contractual Obligation table. In the event that APUC was required to replace the Facilities and project debt with borrowings having less favorable terms or higher interest rates, the level of cash generated for dividends and reinvestment may be negatively impacted. 

The cash flow generated from several of APUC’s operating facilities is subordinated to senior project debt. In the event that there was a breach of covenants or obligations with regard to any of these particular loans which was not remedied, the loan could go into default which could result in the lender realizing on its security and APUC losing its investment in such operating facility. APUC actively manages cash availability at its operating facilities to ensure they are adequately funded and minimize the risk of this possibility. 

## Commodity price risk 

APCo’s exposure to commodity prices is primarily limited to exposure to natural gas price risk. Liberty Water is not subject to any material commodity price risk. In this regard, a discussion of this risk is set out as follows: 

x APCo’s Sanger facility’s PPA includes provisions which reduce its exposure to natural gas price risk. In this regard, a $1.00 increase in the price of natural gas per MMBTU, based on expected production levels, would result in an increase in net revenue by approximately $0.2 million on an annual basis. 

x APCo’s Windsor Locks facility’s ESA includes provisions which reduce its exposure to natural gas price risk but has exposure to market rate conditions for sales above those to Ahlstrom. In this regard, a $1.00 increase in the price of natural gas per MMBTU, based on expected production levels, would result in a decrease in net revenue by approximately $0.1 million on an annual basis. 

x  APCo’s BCI facility’s energy services agreement includes provisions which reduce its exposure to natural gas price risk. In this regard, a $1.00 increase in the price of natural gas per MMBTU, based on expected production levels, would result in an increase in net revenue by approximately $0.1 million. 

x AES provides short-term energy requirements to various customers at fixed rates. The energy requirements of these customers are estimated at approximately 250,000 MW-hrs in fiscal 2013. While the Tinker facility is expected to provide a significant portion of the energy required to service these customers, AES anticipates having to purchase a portion of its energy requirements at the ISO-NE spot rates to supplement self-generated energy. In the event that AES was required to purchase all of its energy requirements at ISO-NE spot rates, each $10.00 change per MW-hr in the market prices in ISO- NE would result in a change in expense of $2.5 million on an annualized basis. This risk is mitigated through the use of short-term financial energy hedge contracts. AES has committed to acquire approximately 72,000 MW-hrs of net energy over the next 12 months at an average rate of 

