Consolidated Other Expenses and Non-controlling Interests (unaudited, $ millions) Year ended December 31 2012 2011 Interest on borrowings less capitalized interest (64) (78) Realized losses on the settlement of forward bond contracts (7) (12) Other finance expense – sundry interest and guarantee and other fees (7) (8) (78) (98) Reversal of previously recognized unrealized losses (gains) representing changes in the fair value of forward bond contracts 8 (2) Other finance expense – amortization and accretion charges (5) (5) Total finance expense (75) (105) Depreciation and amortization (221) (229) Impairments (74) (43) Foreign exchange losses - (13) Gains on disposals 15 93 Income tax recovery 4 - Net income attributable to non-controlling interests 28 111 Finance expense Depreciation and amortization Impairments Gains on disposals Foreign exchange losses Finance expense in 2012 included the reversal of previously recognized unrealized decreases in the fair value of forward bond contracts of $8 million partly offset by realized losses of $7 million resulting in a net decrease to finance expense and an increase to pre-tax income of $1 million. 2011 finance expense included unrealized decreases in the fair value of bond forward contracts of $2 million and realized losses of $12 million resulting in a net increase to finance expense and a decrease to pre-tax income of $14 million. These contracts economically hedged the Company’s exposure to interest rate risk on anticipated debt issues. While these contracts settled at a loss, future interest payments on the debt were and will be incurred at a rate lower than the rate that was locked in by the hedge. In addition, finance expense for 2012 decreased compared with the prior year since there was no finance expense related to CPILP subsequent to its disposal in November 2011. Decreases in depreciation and amortization from the CPILP assets more than offset increased depreciation and amortization related to the 2011 additions of the North East U.S. commercial plants, Keephills 3 and the North Carolina plants and the 2012 addition of Halkirk. The net result was decreased depreciation of $8 million for 2012 compared with the prior year. Impairments, on a pre-tax basis, were $74 million for 2012 compared with $43 million for 2011. The impairment of $74 million recognized in the second quarter of 2012 related to the North East U.S. commercial plants and resulted from reduced expected operating margins. The reductions to the expected operating margins were largely the result of weaker spark spreads in the New England power market. See Significant Events. In the second quarter of 2011, an asset impairment loss of $43 million was recognized related to the CPILP management and operations contracts. Foreign exchange losses were $nil for 2012 since no material foreign exchange contracts settled in the year. Foreign exchange losses of $13 million for 2011 consisted of losses realized on the settlement of foreign exchange contracts entered into in anticipation of U.S. cash payments related to the acquisition of the New England facilities and foreign currency translation losses primarily related to U.S. dollar denominated debt. In 2012, the Company recognized a pre-tax gain of $15 million on disposal of its limited partnership that owned the two hydro facilities, Brown Lake and Miller Creek. The gains on disposals in 2011 primarily related to a pre-tax gain recognized by the Company on disposal of CPILP, including the termination of the manager contracts, of $89 million after deducting legal and other disposal costs of $10 million. Capital Power Corporation Management’s Discussion and Analysis 2012 36