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## Capital Expenditure Program 

Capstone incurred $135,696 in capital expenditures during 2013, which was attributable to each operating segment as follows: 

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Capital expenditures for the power segment in 2013 were in the normal course of operations and primarily related to scheduled maintenance outages with the exception of a $947 investment in WindBOOST at Erie Shores. In2012, capital expenditures in the power segment primarily related to Cardinal's hot gas path inspection. 

For the utilities – water segment, expenditures included both growth initiatives and maintenance activities as outlined in Bristol Water’s regulatory capital expenditure program. In aggregate, Bristol Water’s capital expenditure program spans the AMP5 five-year period. Overall, Bristol Water’s expenditures to date are $20,000 behind the five-year plan but are expected to be fully completed by the end of AMP5 in March 2015. 

## Retirement Benefit Plans 

Bristol Water has a defined benefit plan for current and former employees, which is closed to new employees. This expense is incurred entirely at Bristol Water. There are also defined contribution plans for the employees of Bristol Water and Cardinal. 

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As at December 31, 2013, the defined benefit plan was in a $46,241 surplus position for accounting purposes. The surplus is subject to a number of critical accounting estimates that can materially impact the balances, including foreign exchange translation. The fair values included in the surplus are calculated with the assistance of an actuary and assumptions used are considered to be reasonable by management. 

For 2014, Bristol Water expects to contribute$4,374 compared with its actual contribution of $3,840 in 2013. 

The total defined contribution pension expense recorded in the consolidated statement of income in2013 was $1,563. The expense comprised $1,383 for Bristol Water and $180 for Cardinal. 

## Income Taxes 

Current income tax expense was $2,004 for 2013. This was primarily attributable to $1,494 for Part XII.6 taxes and reassessments on the shortfall of Canadian Renewable and Conservation Expenses ("CRCE") arising from the flow-through shares issued by ReD. 

Deferred income tax assets and liabilities are recognized on Capstone’s consolidated statement of financial position based on temporary differences between the accounting and tax bases of existing assets and liabilities. Deferred income tax assets and liabilities are presented on a net basis where there is a legal right of offset within the same tax jurisdictions. 

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Capstone’s deferred income tax assets of $494 ($3,038 at December 31, 2012) were attributable to the power segment and primarily relate to non-capital tax loss carry-forwards. 

The deferred income tax liabilities balance comprised $74,074 ($53,226 at December 31, 2012) for Capstone’s Canadian entities while $108,493 ($102,269 at December 31, 2012) was attributable to Bristol Water. Deferred income tax liabilities primarily relate to the defined benefit pension plan and differences in the amortization of intangible and capital assets for tax and accounting purposes. 

In 2013 Capstone’s net deferred income tax liability increased by $29,616 which includes $15,548 assumed on the acquisition of ReD. In addition, the net liability increased by $14,068, primarily due to differences between accounting and tax depreciation taken in 2013 and defined benefit pension plan at Bristol Water. These increases were partially offset by a $12,248 tax recovery attributable to a tax rate reduction in the United Kingdom from 23% to 20% effective April 1, 2015. 

