content_image/225200.jpg
## TOTAL SHAREHOLDER RETURN 

Our recent acquisitions and investment initiatives affirmed the growth trajectory of our Company’s earnings and cash flows in 2012 and, consequently, the Board of Directors approved an 11% dividend increase to $0.31 per common share annually.We believe this dividend increase is consistent with our strategy of delivering total shareholder return comprised of an attractive dividend yield and capital appreciation founded on increased earnings and cash fl ows. 

<img src='content_image/225200.jpg'>

## STRENGTHENING OUR BALANCE SHEET 

While we made significant investments in our future, 2012 also saw the results of our efforts to substantially strengthen our balance sheet. In 2012, we added yet another financial instrument to our capital structure through our first issue of $120 million cumulative rate reset preferred shares.The shares have a coupon of 4.5% annually for the initial six-year rate reset period and have been assigned a rating of P-3 and Pfd-3(low) by S&P and DBRS respectively. 

In 2012 we also retired our final two series of convertible debentures and as a result, convertible debentures no longer form part of the Algonquin capital structure. 

The Company has continued to build upon the investment grade debt financing platforms of both APCo and Liberty through the completion of several new senior unsecured credit facilities. APCo successfully completed a follow-on $150 million 4.8% bond offering (swapped to US$ at 4.4%) to 

finance our U.S. wind acquisitions. Additionally, Liberty Utilities closed a U.S. $225 million private placement debt financing to partially fund the natural gas and electric distribution utilities in New Hampshire, Missouri, Illinois and Iowa.These financing platforms were carefully designed to provide us with the additional liquidity and fi nancial flexibility needed to facilitate the continued growth of both our regulated and non-regulated utility businesses. 

Our relationship with Emera, our largest shareholder, remains strong and they have continued to be an enthusiastic supporter of our growth plans.They have increased their ownership in our Company to 25% as contemplated in our strategic investment agreement.We believe that our strong relationship with Emera provides strategic business development support and is an efficient way to raise equity. 

## OUR CHALLENGES 

While we certainly celebrate our accomplishments, we also need to recognize 2012 posed some challenges, such as historically low hydrology, continued depressed power prices in the U.S., longer than expected regulatory processes, and the end of the Region of Peel’s waste supply contract with our energy from waste facility. In facing these challenges we take comfort in the knowledge that this is not the first time we have endured diffi cult circumstances and we remain confi dent that our diversification and contingency planning will ensure we can continue to navigate our way successfully. 

To ensure we fully capitalize on our opportunities, we are enhancing our risk management practices to ensure that the Company’s risks and related exposures are consistent with our business objectives and risk tolerance.We view ourselves as a risk-focused, socially and environmentally sustainable organization committed to investing in our people, our assets, our businesses and ultimately, our future. 

